UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549


                               FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]

For the fiscal year ended           December 31, 1999

                                                          OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]

For the transition period from                    to
    Commission file number                     0-19244

                      Krupp Government Income Trust
           (Exact name of registrant as specified in its charter)

 Massachusetts                                    04-3089272
(State or other jurisdiction           (IRS Employer Identification No.)
of incorporation or organization)


One Beacon Street, Boston, Massachusetts            02108
(Address of principal executive offices)          (Zip Code)

(Registrant's telephone number, including area code)
      (617) 523-0066


Securities registered pursuant to Section 12(b) of the Act:

         Title                      Name of Exchange on which Registered
Shares of Beneficial Interest                     None

Securities registered pursuant to Section 12(g) of the Act:   None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes   X    No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].

Aggregate market value of voting securities held by non-affiliates:
Not applicable.

Documents incorporated by reference: see Part IV, Item 14

The exhibit index is located on pages 13-19

<PAGE>

                                                       PART I

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  Actual  results could differ  materially  from those  projected in the
forward-looking  statements as a result of a number of factors,  including those
identified herein.

ITEM 1.  BUSINESS

Krupp  Government  Income Trust (the  "Trust") was formed on November 1, 1989 by
filing a Declaration of Trust in the Commonwealth of Massachusetts. The Trust is
authorized  to sell and  issue  not more than  17,510,000  shares of  beneficial
interest ("the Shares").  The Trust raised  approximately $300 million through a
public offering of Shares of beneficial interest and used the proceeds available
for investment  primarily to acquire  participating  insured mortgages ("PIMs"),
participating  insured  mortgage  investments  ("PIMIs"),   and  mortgage-backed
securities  ("MBS").  The  Trust  considers  itself  to be  engaged  in only one
industry segment,  investment in mortgages.  The Trust has elected to be treated
as a real estate  investment  trust ("REIT") under the Internal  Revenue Code of
1986, as amended. The Trust shall terminate on December 31, 2029, unless earlier
terminated by the  affirmative  vote of holders of a majority of the outstanding
Shares entitled to vote thereon.

The Trust's investments in PIMs on multi-family  residential  properties consist
of 1) a MBS or an insured mortgage loan  (collectively,  the "insured mortgage")
guaranteed or insured as to principal and basic interest and 2) a  participating
mortgage. The insured mortgages were issued or originated under or in connection
with the housing  programs  of Fannie  Mae,  the  Government  National  Mortgage
Association  ("GNMA"), or the Federal Housing  Administration  ("FHA") under the
authority  of the  Department  of Housing and Urban  Development  ("HUD").  PIMs
provide the Trust with monthly  payments of principal and basic interest and may
also  provide  for Trust  participation  in the  current  revenue  stream and in
residual  value,  if any,  from a sale or other  realization  of the  underlying
property.  The borrower conveys the participation  rights to the Trust through a
subordinated  promissory  note and  mortgage.  The  participation  features  are
neither insured nor guaranteed.

The PIMIs consist of 1) an insured  mortgage issued by GNMA or originated  under
the lending program of the FHA, 2) an additional loan ("Additional Loan") to the
borrower or owners of the borrower in excess of mortgage  amounts  insured under
GNMA or FHA programs that increases the Trust's total  financing with respect to
that property and its participation  interests and 3) a participating  mortgage.
Additional  Loans  associated  with an insured  mortgage issued or originated in
connection with HUD insured programs cannot,  under government  regulations,  be
collateralized by a mortgage on the underlying property.  These Additional Loans
are typically  collateralized by a security  interest  satisfactory to Berkshire
Mortgage Advisors Limited Partnership ("the Advisor").  The Additional Loans are
neither insured nor guaranteed.  In addition, the participation features related
to the  participating  mortgage are neither insured nor  guaranteed.  Additional
Loans  provide  the Trust with  semi-annual  interest  payments  and may provide
additional interest in the future while the participating  mortgage provides for

Trust  participation  in the net  income  and  residual  value,  if any,  of the
underlying property.

The Trust also acquired MBS  collateralized  by  single-family  and multi-family
mortgage  loans issued or originated by GNMA,  Fannie Mae, the Federal Home Loan
Mortgage  Corporation  ("FHLMC")  or FHA.  Fannie  Mae and FHLMC  guarantee  the
principal and basic interest of the Fannie Mae and FHLMC MBS, respectively. GNMA
guarantees  the timely  payment of  principal  and  interest on its MBS, and HUD
insures  the pooled  mortgage  loans  underlying  the GNMA MBS and FHA  mortgage
loans.  The  Trust  will  distribute  all  proceeds  from  prepayments  or other
realizations of mortgage assets to investors either through quarterly  dividends
or special dividends.

Although the Trust will  terminate no later than December 31, 2029, the value of
the PIMs and PIMIs may be realized  by the Trust  through  repayment  or sale as
early as ten years from the dates of the closings of the  permanent  loans,  and
the Trust may realize the value of all of its other investments within that time
frame thereby  resulting in a dissolution  of the Trust  significantly  prior to
December 31, 2029.

The Trust's investments are not expected to be subject to seasonal fluctuations,
although net income may vary  somewhat  from  quarter to quarter  based upon the
participation features of its investments.  The requirements for compliance with
federal,  state and local  regulations  to date have not adversely  affected the
Trust's operations, and the Trust anticipates no adverse effect in the future.

<PAGE>

To qualify as a real estate  investment  trust  ("REIT") for federal  income tax
purposes,  the Trust made a valid election to be so treated and must continue to
satisfy  a range of  complex  requirements  including  criteria  related  to its
ownership structure, the nature of its assets, the sources of its income and the
amount of its dividends to shareholders.  The Trust intends to qualify as a REIT
in each year of operation,  however,  certain factors may have an adverse effect
on the Trust's  REIT  status.  If for any taxable  year,  the  Trustees  and the
Advisor determine that any of the asset,  income, or distribution  tests are not
likely to be satisfied,  the Trust may be required to borrow  money,  dispose of
mortgages or take other action to avoid loss of REIT status.

Additionally,  if the Trust does not qualify as a REIT for any taxable  year, it
will be  subject  to  federal  income  tax as if it were a  corporation  and the
shareholders  will be taxed as shareholders of a corporation.  If the Trust were
taxed as a corporation, the payment of such tax by the Trust would substantially
reduce the funds available for dividends to shareholders or for reinvestment. To
the  extent  that  dividends  had  been  made  in  anticipation  of the  Trust's
qualification as a REIT, the Trust might be required to borrow  additional funds
or to  liquidate  certain  investments  in  order  to pay  the  applicable  tax.
Moreover,  should the Trust's  election to be taxed as a REIT be  terminated  or
voluntarily  revoked, the Trust may not be able to elect to be treated as a REIT
for the following five-year period.

As of December 31, 1999, there were no personnel directly employed by the Trust.

ITEM 2.  PROPERTIES

None.

ITEM 3.  LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Trust is a party
or to which any of its investments are subject to.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                                       PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

There currently is no established public trading market for the Shares.

The number of investors holding Shares as of December 31, 1999 is approximately
11,911.

The Trust has and  intends  to  continue  declaring  and paying  dividends  on a
quarterly basis. The Trustees  established a dividend rate per Share per quarter
of $.325 for 1999 and 1998 and $.17 per Share per quarter for 2000.

ITEM 6.  SELECTED FINANCIAL DATA

The following  table sets forth  selected  financial  information  regarding the
Trust's financial  position and operating  results.  This information  should be
read in  conjunction  with  Management's  Discussion  and  Analysis of Financial
Condition  and  Results  of  Operations   and  the  Financial   Statements   and
Supplementary Data, which are included in Item 7 and Item 8 (Appendix A) of this
report, respectively.

<PAGE>
<TABLE>
<CAPTION>



                                                       (Amounts in thousands, except for per Share amounts)

                                             1999           1998          1997            1996             1995
<S>                                      <C>              <C>            <C>             <C>              <C>
Total revenues                           $   15,632       $ 21,922       $ 17,618        $ 16,358         $ 17,200

Net income                               $   12,317       $ 14,836       $ 12,899        $ 12,481         $ 13,022

Net income per Share                     $      .82       $    .99       $    .86        $    .83         $    .87

Weighted average Shares
 outstanding                                 15,053         15,053         15,053          15,053           15,053
Total assets at
 December 31                             $  142,096       $171,422       $221,779        $241,634         $247,620

Average dividends
 per Share                               $     2.60       $   4.16       $   2.22        $   1.30         $   1.30

</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's  discussion  and  analysis of  financial  condition  and results of
operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities  Exchange Act of
1934.  Actual  results  could  differ  materially  from those  projected  in the
forward-looking  statements as a result of a number of factors,  including those
identified herein.

Impact of the Year 2000 Issue

Starting  in 1997 the  Advisor  conducted  an  assessment  of the  Trust's  core
internal and external computer  information systems to understand the nature and
extent of work  required  to make its  systems  Year 2000  ready.  The Year 2000
readiness  issue was concerned  with the inability of  computerized  information
systems to  accurately  calculate,  store or use a date after 1999.  The Advisor
believed that a system  failure or  miscalculation  could cause  disruptions  of
operations.

As a result  of this  concern,  the  Advisor,  along  with  certain  affiliates,
upgraded their computer  systems  including  their hardware and software so they
would be Year 2000 ready. In addition, the Advisor surveyed the Trust's material
third-party  service providers and significant  vendors and received  assurances
that they were Year 2000 ready. The Advisor also developed contingency plans for
all of its  "mission-critical  functions" to insure  business  continuity.  As a
result of these efforts and the efforts of third parties,  the Year 2000 did not
result in any disruption of activities to the Trust.

Liquidity and Capital Resources

At  December  31,  1999 the  Trust  had  liquidity  consisting  of cash and cash
equivalents,  of approximately $4.6 million as well as the cash inflows provided
by PIMs,  PIMIs,  MBS,  cash and cash  equivalents.  The Trust may also  receive
additional cash flow from the participation  features of its PIMs and PIMIs. The
Trust  anticipates that these sources will be adequate to provide the Trust with
sufficient  liquidity to meet its obligations,  including providing dividends to
its investors.

The most  significant  demand on the Trust's  liquidity is quarterly  dividends,
paid to investors of  approximately  $2.6  million,  and special  distributions.
Funds for dividends come from interest income received on PIMs, PIMIs, MBS, cash
and cash  equivalents  net of operating  expenses and the principal  collections
received on PIMs,  PIMIs and MBS. The portion of dividends funded from principal
collections reduces the capital resources of the Trust. As the capital resources
of the Trust  decrease,  the total cash  flows to the Trust  will also  decrease
which may result in periodic adjustments to the dividends paid to the investors.

<PAGE>

The Advisor  periodically  reviews the  dividend  rate to  determine  whether an
adjustment is necessary based on projected  future cash flows.  Based on current
projections,  the Advisor  presented  the Board of  Trustees  with a proposal to
reduce the dividend  rate to $.17 per Share per quarter  commencing  in February
2000. The Board of Trustees  approved the new rate at their quarterly meeting in
November. In general, the Advisor tries to set a dividend rate that provides for
level quarterly  distributions.  To the extent quarterly  dividends do not fully
utilize the cash  available for  distribution  and cash balances  increase,  the
Advisor may adjust the dividend rate or distribute  such funds through a special
distribution.

The Trust's  PIMIs funded the  construction  or  significant  rehabilitation  of
multifamily  housing,  which  requires  time to  achieve  stabilized  operations
following the  completion  of the work.  With this in mind,  the Trust  required
those  borrowers to escrow a portion of the Additional Loan proceeds in reserves
so funds would be available for the PIMI  Additional  Loan  payments  during the
construction  and lease-up  periods.  As these reserves  become  depleted,  full
payment of the Additional Loan interest becomes  primarily  dependent on whether
the underlying  property generates  sufficient  operating cash flow to make such
payments.

The Seasons was the only property that made its full scheduled  1999  Additional
Loan interest  payments from operating cash flow. Red Run generated some surplus
cash  during  1999,  which  funded a portion  of the  Additional  Loan  interest
payment, the balance was funded with reserves held in escrow by the Trust. Three
others,  Lifestyles,  Mountain View and Windward  Lakes,  operated under workout
agreements  with the Trust during 1999 that  require  Additional  Loan  interest
payments only if surplus cash is generated  through  property  operations  after
servicing  the insured  first  mortgage.  Lifestyles  and Mountain  View did not
generate  any  surplus  cash  during  1999  and  consequently  did not  make any
Additional  Loan interest  payments.  Windward Lakes generated some surplus cash
and made a partial  Additional Loan interest  payment during 1999 that the Trust
has recognized as income.

The Trust also can receive  additional  income through its  participation in the
underlying  properties'  cash  flow  generated  by  operations  over  and  above
operating and capital  requirements  and any  Additional  Loan interest  payment
obligation,  or any  appreciation  in  value  realized  at the time of a sale or
refinance.  However,  this  participation  is dependent  upon  whether  property
operations meet certain criteria. During 1999, the property operating results of
one of the  Trust's PIM  investments  and two of the  Trust's  PIMI  investments
exceeded  the  thresholds  established  by that  criteria  and  paid  the  Trust
participation income: (Lincoln Green, $143,324; Red Run, $4,781 and The Seasons,
$153,498).

Most of the properties had stable operating  results during 1999. High occupancy
rates were maintained and moderate rental income increases were achieved at many
of the  properties  due to stable or improving  markets.  Occupancy at the three
properties that generated  participation income was consistently in the high 90%
range  as  was a  fourth,  Waterford  Townhomes.  Market  forces  have  affected
occupancy at three other properties  more; Mill Pond,  Rivergreens and Riverview
had average  occupancy  during 1999 in the 90% range,  although all three showed
some  improvement  at  year-end.  These  three  properties  generate  sufficient
revenues to address  capital  needs and pay debt  service,  but do not  generate
sufficient surplus cash to pay any participation income to the Trust.  Occupancy
and operating  results at these three  properties  are  operating  under workout
agreements  with the Trust  which  are being  closely  monitored.  Occupancy  at
Windward  Lakes was  generally  consistent  in the low 90% range;  occupancy  at
Lifestyles improved  substantially  during 1999, ending the year in the high 90%
range;  and  occupancy  at Mountain  View  recovered to the high 80% range after
falling to 80% during the first quarter.

Windward Lakes operating results deteriorated during 1995 and 1996, and in early
1997 the  independent  Trustees  approved  a workout  with the  borrower  of the
Windward  Lakes PIMI, an affiliate of the Advisor of the Trust.  In the workout,
the Trust  agreed to reduce the  effective  basic  interest  rate on the insured
first  mortgage  by 2% per annum  for 1997 and 1% per  annum for 1998,  1999 and
2000. The borrower made an equity  contribution  of $133,036 to the property and
agreed to cap the annual  management fee paid to an affiliate at 3% of revenues.
The Trust's  participation  in current  operations is 50% of any Surplus Cash as
determined  under HUD  guidelines  and the Trust's  Additional  Loan interest is
payable out of its share of Surplus Cash.  Any unpaid  Additional  Loan interest
accrues at 7.5% per annum.  During 1999, the Trust received $51,938 as its share
of Surplus Cash generated by Windward  Lakes and credited it towards  Additional
Loan interest  income.  When the property is sold or refinanced,  the Trust will
receive  50% of any  net  proceeds  remaining  after  repayment  of the  insured
mortgage,  the  Additional  Loan,  the interest rate relief,  accrued and unpaid
Additional  Loan  interest  and the  borrower's  equity up to the point that the
Trust has received a  cumulative,  non-compounded  10%  preferred  return on its
investments in the insured mortgage and Additional Loan.

<PAGE>

Lifestyles  operating results deteriorated during 1995, and the Trust approved a
two-year  workout  that  effectively  reduced the  interest  rate on the insured
mortgage by 1%. When that  workout  ended in 1997,  the property was not able to
generate  sufficient  revenues to maintain the property and service the original
interest rate.  Consequently,  the borrower on the Lifestyles  PIMI defaulted on
its May 1, 1998 debt service payment on the insured  mortgage.  The Trust agreed
to a new workout through 2007.  Under its terms,  the Trust agreed to reduce the
effective interest rate on the insured mortgage by 1.75%  retroactively for 1998
to clear the default,  by 1.75% for 1999, and by 1.5% each year thereafter until
the  property  is  sold or  refinanced.  The  borrower  made a  $550,000  equity
contribution,  which has been escrowed for the  exclusive  purpose of correcting
deferred  maintenance  and making  capital  improvements  to the  property.  Any
Surplus  Cash that is  generated  by property  operations  will be split  evenly
between the Trust and the borrower. When the property is sold or refinanced, the
first  $1,100,000 of any proceeds  remaining after the insured  mortgage is paid
off will be split 50% / 50%; the next  $1,690,220  of proceeds will be split 75%
to the Trust and 25% to the borrower;  and any remaining  proceeds will be split
50% / 50%. The borrower's new equity and the reduction in the effective interest
rate on the insured  mortgage  will provide  funds for repairs and  improvements
that should help  reposition  Lifestyles so it can compete more  effectively for
residents  and rental  rates.  As a result of the factors  described  above,  in
December 1998 the Advisor determined that the Additional Loan  collateralized by
the Lifestyles asset was impaired.  As a result,  the Trust recorded a valuation
allowance of $1,130,346 in the fourth  quarter of 1998 and has  maintained  such
allowance in 1999.


Mountain  View is similar to  Lifestyles  with  respect  to  competitive  market
conditions. In June 1999, the Trust entered into a second modification agreement
(the  "Agreement")  with the  borrowers of the  Mountain  View  Apartments  PIMI
reducing the interest rate on the insured  mortgage by 1.25% per annum beginning
January 1, 1999 and  continuing  through  December  31,  2004 and  changing  the
participation  feature. The Agreement eliminated the Preferred Interest required
under the Additional Loan and changed the Trust's  participation  in the surplus
cash generated by property.  Under the Agreement,  the Trust will receive 75% of
the first  $130,667 of surplus cash and 50% of any remaining  surplus cash on an
annual basis to pay the base interest on the Additional Loan.  Unpaid Additional
Loan base interest will accrue and be payable if there are  sufficient  proceeds
from a sale or  refinancing  of the  property  except that  $288,580 of existing
accruals  related to the  Additional  Loan had been forgiven,  In addition,  the
borrower repaid $153,600 of the Additional Loan and funded approximately $54,000
to a reserve for property  improvements.  As a result of the Advisor determining
that the  Mountain  View  Additional  Loan was  impaired,  the Trust  recorded a
valuation allowance of $984,000 in the fourth quarter of 1998. During the fourth
quarter  of 1999,  the Trust  increased  this  reserve by $48,272 as a result of
additional decreases in the collateral value.

Whether the  operating  performance  at any of the  properties  mentioned  above
provide  sufficient  cash flow from operations to pay either the Additional Loan
interest  or  participation  income  will  depend on factors  that the Trust has
little  or no  control  over.  Should  the  properties  be  unable  to  generate
sufficient  cash flow to pay the Additional  Loan interest,  it would reduce the
Trust's  distributable  cash flow and could  affect the value of the  Additional
Loan collateral.

There are  contractual  restrictions  on the  repayment  of the PIMs and  PIMIs.
During the first five years of the  investment,  borrowers are  prohibited  from
repayment.  During the  second  five  years,  the PIM  borrowers  can prepay the
insured  first  mortgage  by paying the greater of a  prepayment  penalty or the
participation due at the time of the prepayment.  Similarly,  the PIMI borrowers
can prepay the insured first mortgage and the Additional  Loan by satisfying the
Preferred Return obligation. The participation features and Additional Loans are
neither  insured nor  guaranteed.  If the  prepayment of the PIM or PIMI results
from the foreclosure on the underlying property or an insurance claim, the Trust
would probably not receive any participation income or any amounts due under the
Additional Loan.

During the third quarter of 1999, the Trust received a prepayment of the Audubon
Villas PIMI when the property was refinanced.  The Trust received the prepayment
of the principal  balance of the insured  mortgage,  $14,861,957,  the principal
balance  of  the  Additional  Loan,  $2,691,000,  and  participation  income  of
$1,966,901.  Also,  $1,962,261 was recognized as Additional Loan interest income
which was  previously  recorded  as deferred  income.  On August 18,  1999,  the
Advisor  declared  a  special  dividend  of  $1.30  per  share  that was paid on
September 17, 1999 from the payoff of the mortgage on Audubon Villas PIMI.

<PAGE>

During the third quarter 1998,  the Trust received a prepayment of the Park
Highlands PIMI when the property was sold. This prepayment occurred prior to the
expiration of the five-year  prohibition.  However,  the Advisor agreed to allow
the transaction to be completed while market conditions were favorable in return
for an additional  prepayment penalty.  The Trust received the prepayment of the
principal  balance of the insured  first  mortgage,  $16,752,295,  the principal
balance of the Additional Loan, $3,000,000,  the Additional Loan interest due at
the time of the prepayment,  $57,945,  and the prepayment  penalty for the early
payoff,  $479,476.  In  addition,  the  Trust  received  participation  interest
comprised  of  the  outstanding   Preferred  Return  on  the  Trust  investment,
$1,481,865, and the Trust's share in the increase in the value of the underlying
property, $1,206,719.

Also during the third quarter of 1998,  the Trust  received a prepayment of
the Coconut  Palm Club PIMI.  This  transaction  was the result of a sale of the
underlying  property as well,  although  the Trust  received  less than its full
Preferred  Return.  The  Advisor  agreed to allow the  transaction  because  the
purchase  price was judged to be  favorable  in light of the highly  competitive
rental market in Broward County,  Florida. In addition,  without the sale it was
likely  that the  Advisor  would  have  agreed  to a loan  restructure  with the
borrower rather than expose the Trust to the uncertainty of a probable  default.
The Trust received the prepayment of the principal  balance of the insured first
mortgage, $15,851,211, the principal balance of the Additional Loan, $2,850,900,
and the Additional Loan interest due at the time of the repayment,  $89,090.  In
addition,  the Trust received  participation  interest of $1,419,116 towards the
Preferred Return.

The Trust paid a special  dividend on  September 9, 1998 of $2.86 per Share
from the prepayment proceeds of the Park Highlands and Coconut Palm Club PIMIs.

The  Trust  has the  option  to call  certain  PIMs  and all the  PIMIs  by
accelerating their maturity if the loans are not prepaid by the tenth year after
permanent funding.  The Advisor will determine the merits of exercising the call
option for each PIM and PIMI as economic conditions warrant. Such factors as the
condition of the asset, local market  conditions,  the interest rate environment
and available financing will have an impact on these decisions.

Assessment of Credit Risk

The Trust's  investments  in insured  mortgages  and MBS are  guaranteed or
insured by Fannie Mae, the Federal Home Loan Mortgage  Corporation  (FHLMC), the
Government  National Mortgage  Association  (GNMA) and the Department of Housing
and Urban  Development (HUD) and therefore the certainty of their cash flows and
the  risk  of   material   loss  of  the   amounts   invested   depends  on  the
creditworthiness of these entities.

Fannie Mae is a federally  chartered  private  corporation  that guarantees
obligations  originated  under  its  programs.  FHLMC is a  federally  chartered
corporation  that guarantees  obligations  originated  under its programs and is
wholly-owned  by the twelve Federal Home Loan Banks.  These  obligations are not
guaranteed  by the U.S.  Government  or the Federal  Home Loan Bank Board.  GNMA
guarantees  the full and timely  payment of principal and basic  interest on the
securities it issues,  which represents  interest in pooled mortgages insured by
HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by
the full faith and credit of the U.S. Government.

The Trust's  Additional  Loans have similar risks as those  associated with
higher risk debt  instruments,  including:  reliance  on the  owner's  operating
skills,  ability to  maintain  occupancy  levels,  control  operating  expenses,
ability to maintain  the  properties  and obtain  adequate  insurance  coverage;
adverse changes in general economic  conditions,  adverse local conditions,  and
changes in governmental  regulations,  real estate zoning laws, or tax laws; and
other circumstances over which the Trust may have little or no control.

The Trust includes in cash and cash equivalents  approximately $4.2 million
of Agency paper.

Interest Rate Risk
<PAGE>

The Trust's  primary  market risk exposure is to interest rate risk,  which
can be defined as the exposure of the Trust's net income,  comprehensive  income
or financial  condition to adverse  movements in interest rates. At December 31,
1999,  the Trust's  PIMs,  PIMIs and MBS  comprise  the  majority of the Trust's
assets.  As such,  decreases in interest  rates may accelerate the prepayment of
the Trust's  investments.  The Trust does not utilize any  derivatives  or other
instruments  to  manage  this  risk  as  the  Trust  plans  to  hold  all of its
investments to expected maturity.

The Trust monitors  prepayments and considers prepayment trends, as well as
distribution   requirements  of  the  Trust,   when  setting  regular   dividend
distribution policy. For MBS, the fund forecasts  prepayments based on trends in
similar  securities  as  reported  by  statistical  reporting  entities  such as
Bloomberg.  For PIMs and PIMIs, the Trust  incorporates  prepayment  assumptions
into planning as individual  properties notify the Trust of the intent to prepay
or as they mature.

The  table  below  provides   information  about  the  Company's  financial
instruments  that are  sensitive  to changes in  interest  rates.  For  mortgage
investments,  the table  presents  principal  cash  flows and  related  weighted
average interest rates by expected maturity dates. The expected maturity date is
contractual maturity adjusted for expectations of prepayments.
<TABLE>
<CAPTION>

                                    Expected maturity dates ($ in thousands)


                             2000         2001       2002       2003        2004        Thereafter       Total       Fair Value
                                                                                        Face Value

Interest-sensitive assets:
<S>                         <C>         <C>        <C>        <C>         <C>        <C>              <C>          <C>
MBS                         $1,731      $ 1,498    $ 1,297    $ 1,126     $    980   $    10,833      $  17,465    $    17,495
Weighted
average interest rate         8.34%        8.34%      8.34%      8.34%        8.34%         8.34%          8.34%

PIMS                           440          476     14,051        258          280        31,827         47,332         46,995
Weighted
average interest rate         7.67%        7.67%      8.06%      8.06%        8.06%         8.06%          7.90%

PIMIS                          377          409        445        484          525        57,889         60,129         59,081
Weighted
average interest rate         7.49%        7.72%      7.72%      7.72%        7.72%         7.91%          7.71%


Additional Loans                 0            0      2,471      1,400        2,900         3,743         10,514          8,351
Weighted
Average interest rate         6.27%        6.27%      5.90%      5.66%        4.63%         4.63%          5.82%

Total Interest-
Sensitive Assets            $2,548       $2,383    $18,264     $3,268    $   4,685    $  104,292     $  135,440     $  131,922

</TABLE>
<PAGE>

Operations

The following  discussion relates to the operations of the Trust during the
years ended December 31, 1999,  1998 and 1997.  Dollars are stated in thousands,
except for per Share amounts.
<TABLE>
<CAPTION>
                                                                Years Ended December 31,

                                             1999                      1998                       1997
                                                        Per                      Per                          Per
                                           Amount      Share         Amount     Share           Amount       Share
Interest income on PIMs
  and PIMIs:
    <S>                                  <C>           <C>          <C>         <C>             <C>           <C>
    Basic Interest                       $  8,789      $  .58       $10,636     $ .71           $12,181       $ .81
    Additional Loan interest                2,535         .18         3,081       .20               794         .05
    Participation income                    2,269         .15         5,094       .34             1,385         .09
Interest income on MBS                      1,531         .10         1,930       .13             2,199         .15
Interest income on cash
 and cash equivalents                         508         .03         1,181       .08             1,059         .07
Trust expenses                             (1,595)       (.11)       (1,973)     (.13)           (2,313)       (.15)
Amortization of prepaid
 fees and expenses                         (1,672)       (.11)       (2,999)     (.20)           (2,406)       (.16)
Provision for impaired
  mortgage loans                              (48)          -        (2,114)     (.14)              -             -

      Net income                         $ 12,317      $  .82       $14,836     $ .99           $12,899       $ .86

Weighted average
   Shares outstanding                          15,053,135               15,053,135                   15,053,135
</TABLE>

The net  income of the Trust for 1999  decreased  as  compared  to 1998 and
1997.  During the three  years in the  periods  ended  December  31, the Trust's
operations have  experienced  changes in the mix of interest income as the Trust
has had prepayments in its PIMs and PIMIs.  These  prepayments  have reduced the
basic  interest  on PIMs and  PIMIs,  and  decreased  participation  income  and
additional  loan  interest  income in 1999 as compared to 1998.  The Trust's net
income  decreased by  approximately  $2.5 million for 1999 when compared to 1998
due  primarily  to  decreases  in  interest  income  net of  decreases  in asset
management fees due to an affiliate,  the provision for impaired  mortgage loans
and  amortization  expense.  The prepayment of Park Highland and Coconut Palm in
1998, and Audubon  Villas in 1999 caused a decrease in basic interest  income on
PIM and  PIMIs.  Participation  income  was  higher in 1998 by $2.8  million  as
compared to 1999 resulting from the participation  income received when the Park
Highlands and Coconut Palm PIMIs prepaid, exceeding the income received when the
Audubon  Villas PIMI prepaid in 1999.  Interest  income on MBS will  continue to
decline as  principal  collections  reduce  the MBS  investment  balance.  Other
interest income decreased due to lower average cash balances.

Amortization  expense  decreased due to the payoffs of the Audubon  Villas,
Park Highland and Coconut Palm PIMIs.  The decrease in asset  management fees is
due to the Trust's asset base  declining.  The  provision for impaired  mortgage
loans  decreased  from 1998 to 1999. In 1998, the Trust recorded a provision for
impaired  mortgage  loans in connection  with the  Lifestyles  and Mountain View
Additional  Loans.  In 1999, the trust recorded an additional  $48,000 to adjust
the carrying value of the loan to the estimated fair value of the collateral.

The Trust's net income for 1998  increased  by  approximately  $1.9 million
when  compared  to  1997  due  primarily  to  higher  participation  income  and
Additional  Loan  interest  caused by the  prepayments  of Coconut Palm and Park
Highlands  PIMI's.  This was somewhat  offset by the Trust recording a provision
for impaired  mortgage  loans of $ 2,114,000 in 1998 related to  Lifestyles  and
Mountain View as discussed  above and lower basic  interest.  The Trust received
$1,419,000  from  Coconut  Palm  Club and  $3,168,000  from Park  Highlands  for
participation  income and the Trust  recognized all of the  previously  deferred
Additional  Loan  interest of $1,290,000  from Coconut Palm Club and  $1,295,000
from Park Highlands as Additional Loan interest. The prepayments also caused the
majority of the  decline in basic  interest.  Other  interest  income  increased
$122,000 due primarily to the Trust having higher short-term investment balances
during 1998 when compared to 1997.
<PAGE>

The Trust saw a decline in expense  reimbursements  in 1998 due to a rebate
for expense  reimbursements  related to 1997 received in 1998.  Asset management
fees  decreased  $199,000 in 1998  primarily as a result of the Coconut Palm and
Park Highland PIMI prepayments.  The increase in amortization expense is because
the Trust fully  amortized the  remaining  balances of prepaid fees and expenses
associated with the Park Highlands and Coconut Palm Club PIMI's.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    See Appendix A to this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

               None.
                                                        PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information as to the Trustees and Executive Officers of
Krupp Government Income Trust is as follows:

                                               Position with Krupp
                       Name and Age            Government Income Trust

           Douglas Krupp (53)          Chairman of Board of Trustees and Trustee
  *        Charles N. Goldberg (58)    Trustee
  *        E. Robert Roskind (55)      Trustee
  *        J. Paul Finnegan (75)       Trustee
           Robert A. Barrows (42)      Treasurer
           Scott D. Spelfogel (39)     Clerk
           Kristin L. Hicks (33)       Assistant Clerk

* Independent Trustee

Douglas Krupp  co-founded  and serves as  Co-Chairman  and Chief  Executive
Officer of The Berkshire  Group,  an integrated real estate  financial  services
firm  engaged in real estate  acquisition  and property  management,  investment
sponsorship,  venture capital investing, mortgage banking, financial management,
and ownership of three operating  companies through private equity  investments.
Mr. Krupp has held the position of  Co-Chairman  since The  Berkshire  Group was
established  as The  Krupp  Companies  in 1969 and he has  served  as the  Chief
Executive  Officer  since  1992.  Mr.  Krupp  serves as a member of the Board of
Trustees at Brigham & Women's Hospital. He is a graduate of Bryant College where
he received an honorary Doctor of Science in Business Administration in 1989 and
was elected trustee in 1990.

Charles  N.  Goldberg  is of counsel  to the law firm of  Broocks,  Baker &
Lange,  L.L.P.,  which  position he has held since  December  of 1997.  Prior to
joining Broocks,  Baker & Lange,  L.L.P.,  Mr. Goldberg was a partner in the law
firm of Hirsch &  Westheimer  from March of 1996 to December  of 1997.  Prior to
Hirsch & Westheimer, he was the Managing Partner of Goldberg Brown, Attorneys at
Law from 1980 to March of 1996.  He received a B.B.A.  degree and a J.D.  degree
from the  University  of Texas.  He is a member of the State Bar of Texas and is
admitted to practice  before the U.S.  Court of Appeals,  Fifth Circuit and U.S.
District Court,  Southern District of Texas. He currently serves as a Trustee of
Krupp Government Income Trust.


E.  Robert  Roskind  is the  Chairman  and  Co-Chief  Executive  Officer of
Lexington Corporate  Properties,  a self-administered  REIT, the shares of which
are listed on the NYSE. Mr. Roskind has served in this capacity since October of
1993. Mr.  Roskind is also the Managing  Partner of The LCP Group, a real estate
investment  firm based in New York,  the  predecessor  of which he co-founded in
1974.  He holds a B.A.  degree from the  University of  Pennsylvania  and a J.D.
degree from Columbia Law School.  He has been a member of the New York Bar since
1970.  He  currently  serves as a Trustee of Krupp  Government  Income Trust and
Chairman of the Board of Trustees of Lexington Corporate Properties.
<PAGE>

J. Paul Finnegan  retired as a partner of Coopers & Lybrand in 1987.  Since
then, he has been engaged in business as a consultant, director, and arbitrator.
Mr. Finnegan holds a B.A. degree from Harvard College, a J.D. degree from Boston
College Law School and an ASA degree from  Bentley  College.  Mr.  Finnegan is a
Certified Public Accountant and an attorney.  Mr. Finnegan currently serves as a
Trustee of Krupp  Government  Income  Trust and a director at  Scituate  Federal
Savings Bank.

Robert A. Barrows is the Treasurer of the Trust,  Senior Vice President and
Chief  Financial  Officer of Berkshire  Mortgage  Finance.  Mr. Barrows has held
several  positions  within The Berkshire Group since joining the company in 1983
and is currently responsible for accounting,  financial reporting,  treasury and
management  information systems for Berkshire Mortgage Finance. Prior to joining
The Berkshire  Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in
Boston.  He received a B.S. degree from Boston College and is a Certified Public
Accountant.

Scott D.  Spelfogel is the Clerk of the Trust,  Senior Vice  President  and
General  Counsel  to The  Berkshire  Group.  Prior to 1997,  he  served  as Vice
President and Assistant  General  Counsel.  Before  joining the firm in November
1988, he was a litigator in private  practice in Boston.  He received a Bachelor
of Science degree in Business  Administration  from Boston  University,  a Juris
Doctor  Degree from Syracuse  University's  College of Law, and a Master of Laws
degree in Taxation from Boston University Law School. He is admitted to practice
law in  Massachusetts  and  New  York,  is a  member  of the  American,  Boston,
Massachusetts  and New York State bar associations and is a licensed real estate
broker in Massachusetts.

Kristin  L.  Hicks is the  Assistant  Clerk of the Trust  and is  Assistant
General  Counsel  to The  Berkshire  Group.  Prior to 1999,  she served as Staff
Attorney for The Berkshire  Group beginning in September 1997, and prior to that
position,  she was the manager of the transfer  department for Krupp Funds Group
from May of 1992  through  September of 1997.  She  received a B.A.  degree from
Northeastern  University in 1989 and a J.D.  degree from the Suffolk  University
Law School in 1995.  She is admitted to practice law in  Massachusetts  and is a
member of the American, Massachusetts and Boston bar associations.

      In addition, the following are deemed to be Executive Officers
      of the registrant:

George Krupp (age 55) is the  Co-Founder  and  Co-Chairman of The Berkshire
Group, an integrated real estate financial  services firm engaged in real estate
acquisition and property  management,  investment  sponsorship,  venture capital
investing,  mortgage  banking,  financial  management,  and  ownership  of three
operating companies through private equity  investments.  Mr. Krupp has held the
position of Co-Chairman  since The Berkshire  Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High  School in  Waltham,  Massachusetts  since  September  of 1997.  Mr.  Krupp
attended the  University  of  Pennsylvania  and Harvard  University  and holds a
Master's Degree in History from Brown University.

Peter F. Donovan (age 46) is Chief Executive Officer of Berkshire  Mortgage
Finance which  position he has held since January of 1998 and in this  capacity,
he oversees the strategic growth plans of this mortgage banking firm.  Berkshire
Mortgage Finance is the 16th largest in the United States based on servicing and
asset  management  of a $7.2 billion  loan  portfolio.  Previously  he served as
President of Berkshire  Mortgage Finance from January of 1993 to January of 1998
and in that  capacity he directed the  production,  underwriting,  servicing and
asset  management  activities  of the firm.  Prior to that,  he was Senior  Vice
President  of  Berkshire   Mortgage   Finance  and  was   responsible   for  all
participating  mortgage  originations.  Before  joining the firm in 1984, he was
Second Vice  President,  Real Estate Finance for Continental  Illinois  National
Bank & Trust,  where he managed a $300 million  construction  loan  portfolio of
commercial  properties.  Mr. Donovan received a B.A. from Trinity College and an
M.B.A. degree from Northwestern University.

Ronald  Halpern  (age 58) is  President  and  Chief  Operating  Officer  of
Berkshire  Mortgage  Finance.  He has served in these positions since January of
1998 and in this capacity,  he is responsible for the overall  operations of the
Company. Prior to January of 1998, he was Executive Vice President, managing the
underwriting,  closing,  portfolio  management  and  servicing  departments  for
Berkshire  Mortgage  Finance.  Before  joining the firm in 1987,  he held senior
management  positions  with the  Department of Housing and Urban  Development in
Washington D.C. and several HUD regional offices.  Mr. Halpern has over 30 years
of experience in real estate  finance.  He is currently a member of the Advisory
Council  for  Fannie  Mae and  Freddie  Mac and was  prior  Chairman  of the MBA
Multifamily Housing Committee. He holds a B.A. degree from the University of the
City of New York and a J.D. degree from Brooklyn Law School.

<PAGE>

Carol J.C. Mills (age 50) is Senior Vice  President for Loan  Management of
Berkshire Mortgage Finance and in this capacity, she is responsible for the Loan
Servicing  and Asset  Management  functions of the Boston,  Bethesda and Seattle
offices of Berkshire  Mortgage  Finance.  She manages the estimated $7.2 billion
portfolio  of  loans.  Ms.  Mills  joined  Berkshire  in  December  1997 as Vice
President  and was  promoted  to Senior Vice  President  in January  1999.  From
January  1989  through  November  1997,  Ms.  Mills was Vice  President of First
Winthrop Corporation and Winthrop Financial  Associates,  in Cambridge,  MA. Ms.
Mills  earned  a  B.A.  degree  from  Mount  Holyoke  College  and a  Master  of
Architecture degree from Harvard  University.  Ms. Mills is a member of the Real
Estate  Finance  Association,  New England Women in Real Estate and the Mortgage
Bankers Association.

ITEM 11.  EXECUTIVE COMPENSATION

Except for the Independent  Trustees as described  below,  the Trustees and
Officers of the Trust have not been and will not be compensated by the Trust for
their services.  However,  the Officers will be compensated by the Advisor or an
affiliate of the Advisor.

Compensation of Trustees

The Trust paid each of the Independent Trustees a fee of $25,000 in 1999.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of  February  5,  2000,  no  person  owned of record or was known by the
Advisor to own beneficially more than 5% of the Trust's  15,053,135  outstanding
Shares.  The only shares held by the Advisor or any of its affiliates consist of
the original 10,000 Shares.
<TABLE>
<CAPTION>
<S>                    <C>                              <C>                                  <C>
Class of               Name of Beneficial               Amount and Nature of                 Percent
 Stock                        Owner                     Beneficial Interest                  of Class
Shares of              Douglas Krupp
Beneficial             One Beacon Street
Interest               Boston, Mass. 02108              10,000 Shares**                       ***

Shares of
Beneficial             All Directors and
Interest                Officers                        10,000 Shares                         ***
</TABLE>

     ** Mr. Krupp is a beneficial  owner of the 10,000  shares held by Berkshire
Mortgage Advisors Limited Partnership,  the Advisor to the Company, by virtue of
being a director  of  Berkshire  Funding  Corporation,  the  general  partner of
Berkshire Mortgage Advisors Limited Partnership. In each case where Mr. Krupp is
a beneficial owner of shares he has shared voting and investment powers.

     *** The  amount  owned  does  not  exceed  one  percent  of the  shares  of
beneficial interest of the Trust outstanding as of February 5, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          See Note G to Financial Statements included in Appendix A of
          this report.
<PAGE>

                                                         PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)     1.     Financial  Statements - see Index to Financial  Statements and
               Supplementary  Data included under Item 8, Appendix A, on
               page F-2 of this report.


        2.     Financial  Statement  Schedules - see Index to  Financial
               Statements  and  Supplementary  Data  included  under Item 8,
               Appendix A, on page F-2 of this  report.  All  schedules  are
               omitted as they are not  applicable,  not  required or the
               information is provided in the Financial Statements or the Notes
               thereto.

(b)     Exhibits:

        Number and Description
        Under Regulation S-K

        The following reflects all applicable Exhibits required under Item 601
        of Regulation S-K:

         (4)   Instruments defining the rights of security holders including
               indentures:

          (4.1) Second Amended and Restated  Declaration of Trust filed with The
          Massachusetts  Secretary  of State  on April  12,  1990  [Included  as
          Exhibit 4.4 to Prospectus included in Pre-effective Amendment No. 3 to
          Registrant's  Registration Statement on Form S-11 dated April 16, 1990
          (File No. 33-31942)].*

          (4.2)  Subscription  Agreement  Specimen  [Included  as  Exhibit  C to
          Prospectus  included in Pre-effective  Amendment No. 2 to Registrant's
          Registration  Statement  on Form S-11 dated  March 23,  1990 (File No.
          33-31942)].*

         (10)  Material Contracts:

          (10.1) Advisory Services  Agreement dated October 22, 1990 between the
          Trustee and Krupp Mortgage Advisors Limited Partnership. [Exhibit 10.1
          to  Registrant's  report on Form 10-K for the year ended  December 31,
          1994 (File No. 0-19244)].*

          (10.2) Assignment and Assumption  Agreement dated December 29, 1994 by
          and between  Berkshire Realty Advisors Limited  Partnership  (formerly
          known as Krupp Realty Advisors  Limited  Partnership  ("Assignor") and
          Berkshire Mortgage Advisors Limited Partnership  ("Assignee") [Exhibit
          10.2 to  Registrant's  report on Form 10-K for the year ended December
          31, 1994 (File No. 0-19244)].*

          Lifestyles Apartments

          (10.3)  Subordinated  Promissory  Note dated December 11, 1990 between
          Lifestyles At Boot Ranch (the "Mortgagor") and Krupp Government Income
          Trust (the "Holder")  [Exhibit 10.1 to  Registrant's  Annual Report on
          Form 10-K for the  fiscal  year  ended  December  31,  1990  (File No.
          33-31942)].*

          (10.4) Agreement RE Subordinated  Note dated December 11, 1990 between
          Krupp Government Income Trust and Krupp Mortgage  Corporation [Exhibit
          10.2 to  Registrant's  Annual  Report on Form 10-K for the fiscal year
          ended December 31, 1990 (File No. 33-31942)].*

          (10.5)  Subordinated  Multifamily  Mortgage  dated  December  11, 1990
          between   Lifestyles  at  Boot  Ranch  (the   "Mortgagor")  and  Krupp
          Government   Income   Trust  (the   "Mortgagee")   [Exhibit   10.3  to
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1990 (File No. 33-31942)].*

<PAGE>

          (10.6)  Additional  Loan  Agreement  dated  December  11, 1990 between
          FL-Tampa,  Inc.  and  M  &  D  Palm  Harbor,  Inc  (collectively,  the
          "Borrowers") and Krupp Government Income Trust (the "Holder") [Exhibit
          10.4 to  Registrant's  Annual  Report on Form 10-K for the fiscal year
          ended December 31, 1990 (File No. 33-31942)].*

          (10.7)  Additional Loan Note dated December 11, 1990 between FL-Tampa,
          Inc and M & D Palm Harbor,  Inc.  (collectively,  the "Borrowers") and
          Krupp  Government  Income  Trust  (the  "Holder")   [Exhibit  10.5  to
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1990 (File No. 33-31942)].*

          (10.8)  Mortgage  Note dated  December 11, 1991 between  Lifestyles at
          Boot  Ranch  (the  "Borrower")  and Krupp  Mortgage  Corporation  (the
          "Holder").  [Exhibit 10.6 to  Registrant's  Annual Report on Form 10-K
          for the fiscal year ended December 31, 1991 (File No. 0-19244)].*

          (10.9) GNMA Purchase  Agreement  dated December 11, 1991 between Krupp
          Government Income Trust and Krupp Mortgage Corporation.  [Exhibit 10.7
          to  Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1991 (File No. 0-19244)].*

          (10.10) Modification  Agreement by and between Krupp Government Income
          Trust and  Lifestyles at Boot Ranch and M&D Palm Harbor,  and FL-Tampa
          Inc. [Exhibit 10.1 to Registrant's report on Form 10-Q for the quarter
          ended September 30, 1996 (File No. 0-19244)].*

          (10.11)  Escrow  Deposit  Agreement  by and between  Krupp  Government
          Income  Trust and M&D Palm  Harbor,  and  FL-Tampa  Inc.  the  general
          partners of  Lifestyles at Boot Ranch.  [Exhibit 10.2 to  Registrant's
          report on Form 10-Q for the quarter ended September 30, 1996 (File No.
          0-19244)].*

          (10.12) Second Modification  Agreement by and between Krupp Government
          Income  Trust  and  Lifestyles  at  Boot  Ranch  and M&D  Palm  Harbor
          Partnership and FL-Tampa, Inc. +

          Windward Lakes Apartments

          (10.13)  Subordinated  Promissory Note dated December 28, 1990 between
          the  McNab-K  C 3  Limited  Partnership  (the  "Mortgagor")  and Krupp
          Government  Income Trust (the "Holder")  [Exhibit 10.6 to Registrant's
          Annual Report on Form 10-K for the fiscal year ended December 31, 1990
          (File No. 33-31942)].*

          (10.14)  Additional  Loan  Agreement  dated  December 28, 1990 between
          George  Krupp,  Douglas  Krupp and Krupp GP, Inc.  (collectively,  the
          "Borrowers") and Krupp Government Income Trust (the "Holder") [Exhibit
          10.7 to  Registrant's  Annual  Report on Form 10-K for the fiscal year
          ended December 31, 1990 (File No. 33-31942)].*

          (10.15) Additional Loan Note dated December 28, 1990 between Krupp GP,
          Inc., George Krupp and Douglas Krupp  (collectively,  the "Borrowers")
          and Krupp  Government  Income Trust (the  "Holder")  [Exhibit  10.8 to
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1990 (File No. 33-31942)].*

          (10.16) Agreement RE Subordinated Note dated December 28, 1990 between
          Krupp Government Income Trust and Love Funding  Corporation.  [Exhibit
          10.11 to  Registrant's  Annual Report on Form 10-K for the fiscal year
          ended December 31, 1991 (File No. 0-19244)].*

          (10.17)  Subordinated  Multi-family  Mortgage  dated December 28, 1991
          between  McNab-KC3  Limited  Partnership  (the  "Borrower")  and Krupp
          Government Income Trust (the "Lender"). [Exhibit 10.12 to Registrant's
          Annual Report on Form 10-K for the fiscal year ended December 31, 1991
          (File No. 0-19244)].*

<PAGE>

          (10.18) GNMA Purchase  Agreement dated December 28, 1991 between Krupp
          Government Income Trust and Love Funding  Corporation.  [Exhibit 10.13
          to  Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1991 (File No. 0-19244)].*

          (10.19) Modification  Agreement between Krupp Government Income Trust,
          Love Funding Corporation, McNab-KC3 Limited Partnership, and Krupp GP,
          Inc. +


          River View Apartments

          (10.20)  Subordinated  Promissory  Note  dated  April 2, 1991  between
          Sterling Partners III Limited  Partnership (the "Mortgagor") and Krupp
          Government  Income Trust (the "Holder")  [Exhibit 19.1 to Registrant's
          report on Form 10-Q for the  quarter  ended  June 30,  1991  (File No.
          0-19244)].*

          (10.21) Agreement RE Subordinated  Promissory Note dated April 2, 1991
          between  Krupp  Government  Income Trust and Love Funding  Corporation
          [Exhibit  19.2 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1991 (File No. 0-19244)].*

          (10.22) Subordinated  Multifamily Mortgage dated April 2, 1991 between
          Sterling Partners III Limited  Partnership (the "Mortgagor") and Krupp
          Government   Income   Trust  (the   "Mortgagee")   [Exhibit   19.3  to
          Registrant's  report on Form 10-Q for the quarter  ended June 30, 1991
          (File No. 0-19244)].*

          (10.23)  Supplement  to  Prospectus  dated May 1, 1991 for  Government
          National  Mortgage  Association  Pool Number  280840  [Exhibit 19.4 to
          Registrant's  report on Form 10-Q for the quarter  ended June 30, 1991
          (File No. 0-19244)].*

          Mill Pond Apartments

          (10.24)  Subordinated  Promissory Note dated May 28, 1991 between Mill
          Pond Limited Partnership (the "Mortgagor") and Krupp Government Income
          Trust (the "Holder") [Exhibit 19.5 to Registrant's report on Form 10-Q
          for the quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.25)  Agreement RE Subordinated  Promissory Note dated May 28, 1991
          between Krupp Government  Income Trust and Krupp Mortgage  Corporation
          [Exhibit  19.6 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1991 (File No. 0-19244)].*

          (10.26)  Subordinated  Multifamily Mortgage dated May 28, 1991 between
          Mill Pond Limited  Partnership (the  "Mortgagor") and Krupp Government
          Income Trust (the "Mortgagee") [Exhibit 19.7 to Registrant's report on
          Form 10-Q for the quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.27)  Mortgage  Note  dated May 28,  1991  between  Krupp  Mortgage
          Corporation  (the "Holder") and Mill Pond Apartments (the  "Borrower")
          [Exhibit  19.8 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1991 (File No. 0-19244)].*

          (10.28)  Participation  Agreement  dated May 28,  1991  between  Krupp
          Mortgage  Corporation (the  "Mortgagee")  and Krupp Government  Income
          Trust  [Exhibit  19.9 to  Registrant's  report  on Form  10-Q  for the
          quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.29)  Assignment of Open End Mortgage  Deed and Security  Agreement
          dated May 28, 1991 between Krupp Mortgage Corporation (the "Assignor")
          and Krupp Government  Income Trust (the  "Assignee")  [Exhibit 19.1 to
          Registrants  report on Form 10-Q for the quarter  ended  September 30,
          1991 (File No. 0-19244)].*

<PAGE>

          Waterford Townhome Apartments

          (10.30)  Subordinated  Promissory  Note  dated June 12,  1991  between
          Waterford  Apartment  Corp.  (the  "Mortgagor")  and Krupp  Government
          Income Trust (the "Holder")  [Exhibit 19.10 to Registrant's  report on
          Form 10-Q for the quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.31) Agreement RE Subordinated  Promissory Note dated June 12, 1991
          between Krupp  Government  Income Trust and  Nichols/Conlan  Financial
          Company  [Exhibit  19.11 to  Registrant's  report on Form 10-Q for the
          quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.32) Subordinated  Multifamily Mortgage dated June 12, 1991 between
          Waterford  Apartments  Corp. (the  "Mortgagor")  and Krupp  Government
          Income Trust (the "Mortgagee")  [Exhibit 19.12 to Registrant's  report
          on Form 10-Q for the quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.33)  Mortgage  Note dated  June 12,  1991  between  Nichols/Conlan
          Financial  Company (the "Holder") and Waterford  Apartment  Corp. (the
          "Borrower") [Exhibit 19.13 to Registrant's report on Form 10-Q for the
          quarter ended June 30, 1991 (File No. 0-19244)].*

          (10.34)   Assignment  of  Loan  Documents   dated  June  12,  1991  by
          Nichols/Conlan Financial Company to Krupp Mortgage Corp [Exhibit 19.14
          to  Registrant's  report on Form 10-Q for the  quarter  ended June 30,
          1991 (File No. 0-19244)].*

          (10.35)   Participation   Agreement   dated  June  12,  1991   between
          Nichols/Conlan   Financial   Company  (the   "Mortgagee")   and  Krupp
          Government Income Trust [Exhibit 19.15 to Registrant's  report on Form
          10-Q for the quarter ended June 30, 1991 (File No. 0-19244)].*

          Rivergreens Apartments

          (10.36)  Subordinated  Promissory Note dated November 14, 1991 between
          Rivergreens Associates Limited Partnership (the "Mortgagor") and Krupp
          Government Income Trust (the "Holder"). [Exhibit 10.33 to Registrant's
          Annual Report on Form 10-K for the fiscal year ended December 31, 1991
          (File No. 0-19244)].*

          (10.37) Agreement  Re-Subordinated  Promissory Note dated November 14,
          1991  between  Krupp  Government   Income  Trust  and  Krupp  Mortgage
          Corporation. [Exhibit 10.34 to Registrant's Annual Report on Form 10-K
          for the fiscal year ended December 31, 1991 (File No. 0-19244)].*

          (10.38) Subordinated Multifamily Deed of Trust dated November 14, 1991
          between  Rivergreens  Associates Limited Partnership (the "Borrower"),
          Oregon Title Insurance  Company (the  "Trustee") and Krupp  Government
          Income Trust (the  "Lender").  [Exhibit 10.35 to  Registrant's  Annual
          Report on Form 10-K for the fiscal year ended  December 31, 1991 (File
          No. 0-19244)].*

          (10.39)  Mortgage Note dated  November 14, 1991 between Krupp Mortgage
          Corporation and Rivergreens  Associates Limited Partnership.  [Exhibit
          10.36 to  Registrant's  Annual Report on Form 10-K for the fiscal year
          ended December 31, 1991 (File No. 0-19244)].*

          (10.40) Participation  Agreement dated November 14, 1991 between Krupp
          Mortgage Corporation and Krupp Government Income Trust. [Exhibit 10.37
          to  Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1991 (File No. 0-19244)].*

          Mountain View Apartments

          (10.41)  Subordinated  Promissory  Note dated April 21,  1992  between
          Mountain View Ltd. (the "Mortgagor") and Krupp Government Income Trust
          (the "Holder").  [Exhibit 19.1 to Registrant's report on Form 10-Q for
          the quarter ended June 30, 1992 (File No. 0-19244)].*

<PAGE>

          (10.42) Agreement RE Subordinated Promissory Note dated April 21, 1992
          between Krupp Government Income Trust and Krupp Mortgage  Corporation.
          [Exhibit  19.2 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1992 (File No. 0-19244)].*

          (10.43) Subordinated Multifamily Mortgage dated April 21, 1992 between
          Mountain View Ltd. (the "Mortgagor") and Krupp Government Income Trust
          (the "Mortgagee").  [Exhibit 19.3 to Registrant's  report on Form 10-Q
          for the quarter ended June 30, 1992 (File No. 0-19244)].*

          (10.44)  Additional Loan Agreement dated April 21, 1992 between Philip
          P.  Mulkey,  Henry V. Bragg and  Gregory V. Bragg  (collectively,  the
          "Borrowers")  and  Krupp  Government   Income  Trust  (the  "Holder").
          [Exhibit  19.4 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1992 (File No. 0-19244)].*

          (10.45)  Additional  Loan Note dated April 21, 1992 between  Philip P.
          Mulkey,  Henry V.  Bragg  and  Gregory  V.  Bragg  (collectively,  the
          "Borrowers")  and  Krupp  Government   Income  Trust  (the  "Holder").
          [Exhibit  19.5 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1992 (File No. 0-19244)].*

          (10.46)  Mortgage Note dated April 21, 1992 between Mountain View Ltd.
          (the  "Borrower")  and  Krupp  Mortgage  Corporation  (the  "Holder").
          [Exhibit  19.6 to  Registrant's  report on Form  10-Q for the  quarter
          ended June 30, 1992 (File No. 0-19244)].*

          (10.47) Modification  Agreement by and between Krupp Government Income
          Trust and Mountain View Ltd. [Exhibit 10.1 to Registrant's report Form
          10-Q for the quarter ended September 30, 1995 (File No. 0-19244)].*

          (10.48) Second Modification  Agreement by and between Krupp Government
          Trust and Mountain View LTD. [Exhibit 10.1 to Registrant's report Form
          10-Q for the quarter ended June 30, 1999 (File No. 0-19244)]*

          Red Run Apartments

          (10.49) Subordinated Promissory Note dated May 5, 1992 between Red Run
          Limited  Partnership (the  "Mortgagor")  and Krupp  Government  Income
          Trust (the  "Holder").  [Exhibit 19.7 to  Registrant's  report on Form
          10-Q for the quarter ended June 30, 1992 (File No. 0-19244)].*

          (10.50)  Agreement RE  Subordinated  Promissory Note dated May 5, 1992
          between Krupp Government  Income Trust and Maryland  National Mortgage
          Corporation (the"Mortgagee").  [Exhibit 19.8 to Registrant's report on
          Form 10-Q for the quarter ended June 30, 1992 (File No. 0-19244)].*

          (10.51)  Subordinated  Multifamily  Mortgage dated May 5, 1992 between
          Red Run  Limited  Partnership  (the  "Trustor")  and Krupp  Government
          Income Trust (the "Lender").  [Exhibit 19.9 to Registrant's  report on
          Form 10-Q for the quarter ended June 30, 1992 (File No. 0-19244)].*

          (10.52)  Additional  Loan Agreement  dated May 5, 1992 between Red Run
          Corporation and Summit Towers Company (collectively,  the "Borrowers")
          and Krupp  Government  Income Trust (the "Holder").  [Exhibit 19.10 to
          Registrant's  report on Form 10-Q for the quarter  ended June 30, 1992
          (File No. 0-19244)].*

          (10.53)  Additional  Loan  Note  dated  May 5,  1992  between  Red Run
          Corporation and Summit Towers Company (collectively,  the "Borrowers")
          and Krupp  Government  Income Trust (the "Holder").  [Exhibit 19.11 to
          Registrant's  report on Form 10-Q for the quarter  ended June 30, 1992
          (File No. 0-19244)].*

<PAGE>

          (10.54)  Deed of Trust Note dated May 5, 1992  between Red Run Limited
          Partnership and Maryland National Mortgage Corporation.  [Exhibit 19.3
          to  Registrant's  report on Form 10-Q for the quarter ended  September
          30, 1992 (File No. 0-19244)].*

          (10.55)  Participation and Servicing Agreement by and between Maryland
          National  Mortgage  Corporation  and Krupp  Government  Income  Trust.
          [Exhibit  19.4 to  Registrant's  report on Form  10-Q for the  quarter
          ended September 30, 1992 (File No. 0-19244)].*

          Lincoln Green Apartments

          (10.56)  Supplement  to  prospectus  dated  August 1, 1992 for Federal
          National Mortgage Association pool number MX-073023.  [Exhibit 19.8 to
          Registrant's  report on Form 10-Q for the quarter ended  September 30,
          1992 (File No. 0-19244)].*

          (10.57)  Subordinated  promissory note dated September 15, 1992 by and
          between Lincoln Green Associates Limited Partnership (the "Mortgagor")
          and Krupp  Government  Income Trust (the  "Holder").  [Exhibit 19.9 to
          Registrant's  report on Form 10-Q for the quarter ended  September 30,
          1992 (File No. 0-19244)].*

          (10.58)  Subordinated  Multi-family  Deed of Trust dated September 16,
          1992 by and between Lincoln Green Associates Limited  Partnership (the
          "Borrower") and Krupp Government Income Trust (the "Lender"). [Exhibit
          19.10  to  Registrant's  report  on Form  10-Q for the  quarter  ended
          September 30, 1992 (File No. 0-19244)].*

          The Seasons

          (10.59) Additional Loan Agreement dated September 16, 1993 between The
          Krupp  Company  Limited  Partnership-IV  (the  "Borrower")  and  Krupp
          Government   Income  Trust  II  (the   "Holder")   [Exhibit  10.80  to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          (10.60)  Additional  Loan Note dated  September  16, 1993  between The
          Krupp  Company  Limited  Partnership-IV  (the  "Borrower")  and  Krupp
          Government   Income  Trust  II  (the   "Holder")   [Exhibit  10.81  to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          (10.61) Subordinated  Promissory Note dated September 16, 1993 between
          Maryland  Associates  Limited  Partnership  (the  "Maker")  and  Krupp
          Government   Income  Trust  II  (the   "Holder")   [Exhibit  10.82  to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          (10.62) Pledge and Security  Agreement dated September 16, 1993 by and
          between The Krupp Company  Limited  Partnership-IV  (the "Debtor") and
          Krupp Government  Income Trust II (the "Secured Party") [Exhibit 10.83
          to  Registrant's  report on Form 10-K for the year ended  December 31,
          1994 (File No. 0-19244)].*

          (10.63)  The Deed of Trust  dated  September  16,  1993 by and between
          Maryland Associates Limited Partnership and Krupp Mortgage Corporation
          [Exhibit 10.84 to Registrant's  report on Form 10-K for the year ended
          December 31, 1994 (File No. 0-19244)].*

          (10.64) Participation and Servicing Agreement made as of September 16,
          1993 by and between Krupp Mortgage  Corporation  (the  "Servicer") and
          Krupp Government Income Trust II (the "Participant") [Exhibit 10.85 to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

<PAGE>

          (10.65)  Assignment and Assumption  Agreement dated September 16, 1993
          between Krupp  Government  Income Trust II (the  "Assignor") and Krupp
          Government   Income   Trust  (the   "Assignee")   [Exhibit   10.86  to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          Rosemont Apartments

          (10.66)  Participation and Servicing Agreement dated July 14, 1994, by
          and between Rockport  Mortgage  Corporation (the "Servicer") and Krupp
          Government  Income  Trust  (the   "Participant")   [Exhibit  10.87  to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          (10.67)  Deed of Trust Note dated July 1, 1994 between  Rosemont  Ltd.
          and Rockport  Mortgage  Corporation.  [Exhibit  10.88 to  Registrant's
          report on Form 10-K for the year  ended  December  31,  1994 (File No.
          0-19244)].*

          (10.68)  Allonge  to Deed of Trust  Note  dated  July 1, 1994  between
          Rosemont  Ltd. and Rockport  Mortgage  Corporation  [Exhibit  10.89 to
          Registrant's  report on Form 10-K for the year ended December 31, 1994
          (File No. 0-19244)].*

          (10.69)  Participation  Certificate with Krupp Government Income Trust
          as registered  owner.  [Exhibit 10.96 to  Registrant's  report on Form
          10-K for the year ended December 31, 1995 (File No. 0-19244)].*

        * Incorporated by reference

        + Filed Herein

        (c)    Reports on Form 8-K

          During the last quarter of the year ended December 31, 1999, the Trust
          did not file any reports on Form 8-K.

<PAGE>

                                  SIGNATURES

          Pursuant to the requirements of Section 13 or 15 (d) of the Securities
          Exchange Act of 1934, the registrant has duly caused this report to be
          signed on its behalf by the undersigned, thereunto duly authorized, on
          the 9th day of March, 2000.

                         KRUPP GOVERNMENT INCOME TRUST




          By:    /s/ Douglas Krupp
                 Douglas  Krupp,  Chairman  of Board of Trustees  and a Trustee
                 of Krupp  Government Income Trust


Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated, on the 9th day of March, 2000.

            Signatures  Title(s)


 /s/ Douglas Krupp                   Chairman of Board of Trustees and a
Douglas Krupp                        Trustee of Krupp Government Income Trust


 /s/ Robert A. Barrows               Treasurer of Krupp Government Income Trust
Robert A. Barrows


 /s/ Charles N. Goldberg             Trustee of Krupp Government Income Trust
Charles N. Goldberg


 /s/ E. Robert Roskind               Trustee of Krupp Government Income Trust
E. Robert Roskind


 /s/ J. Paul Finnegan                Trustee of Krupp Government Income Trust
J. Paul Finnegan


<PAGE>




                                    APPENDIX A

                           KRUPP GOVERNMENT INCOME TRUST










                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                ITEM 8 of FORM 10-K

             ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                        For the Year Ended December 31, 1999





<PAGE>


                          KRUPP GOVERNMENT INCOME TRUST

               INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Report of Independent Accountants                                           F-3

Balance Sheets at December 31, 1999 and 1998                                F-4

Statements of Income and Comprehensive Income for the Years Ended
December 31, 1999, 1998 and 1997                                            F-5

Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997                                            F-6

Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997                                            F-7

Notes to Financial Statements                                        F-8 - F-20

Schedule II - Valuation and Qualifying Accounts                            F-21

Supplementary Data - Selected Quarterly Financial Data (Unaudited)         F-22


All other schedules are omitted as they are not applicable or not required,
or the  information  is  provided  in the  financial
statements or the notes thereto.

<PAGE>




                              REPORT OF INDEPENDENT ACCOUNTANTS







To the Board of Trustees and the Shareholders of
Krupp Government Income Trust:

In our opinion,  the accompanying balance sheets and the related statements
of income and comprehensive  income,  of shareholders'  equity and of cash flows
present  fairly,  in all  material  respects,  the  financial  position of Krupp
Government  Income Trust (the  "Trust") at December  31, 1999 and 1998,  and the
results of its  operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with auditing principles  generally
accepted in the United States. These financial statements are the responsibility
of management;  our  responsibility  is to express an opinion on these financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion expressed above.








                                                     PricewaterhouseCoopers LLP


Boston, Massachusetts
March 9, 2000

<PAGE>

<TABLE>
<CAPTION>
                                              KRUPP GOVERNMENT INCOME TRUST

                                                     BALANCE SHEETS

                                               December 31, 1999 and 1998


                                                         ASSETS
                                                                                    1999                1998

Participating Insured Mortgage Investments
 ("PIMIs") (Notes B, C and J):
<S>                                                                             <C>                  <C>
 Insured Mortgages                                                              $  60,129,492      $  75,386,460
 Additional loans, net of impairment provision of $2,162,618 and
        $2,114,346, respectively                                                    8,350,990         11,243,862
Participating Insured Mortgages ("PIMs")
 (Notes B, D and J)                                                                47,331,673         47,737,583
Mortgage-Backed Securities and insured
 mortgage loan("MBS") (Notes B, E and J)                                           17,495,423         22,132,858

              Total mortgage investments                                          133,307,578        156,500,763

Cash and cash equivalents (Notes B and J)                                           4,627,499          9,004,397
Interest receivable and other assets                                                  973,491          1,057,365
Prepaid acquisition fees and expenses, net
 of accumulated amortization of $6,089,755
   and $6,125,191, respectively (Note B)                                            2,243,706          3,445,605
Prepaid participation servicing fees, net of
 accumulated amortization of $1,834,434
   and $1,776,625, respectively (Note B)                                              943,315          1,413,559

              Total assets                                                      $ 142,095,589      $ 171,421,689

                                         LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans (Note B)                                    $   3,918,021      $   5,773,669
Other liabilities                                                                      25,025             33,230

              Total liabilities                                                     3,943,046          5,806,899

Commitments (Note H)

Shareholders' equity (Notes A, F, H and I):
        Common stock, no par value; 17,510,000
        Shares authorized; 15,053,135 Shares
        issued and outstanding                                                    137,921,227        164,742,014
     Accumulated comprehensive income (Note B)                                        231,316            872,776

              Total Shareholders' equity                                          138,152,543        165,614,790

              Total liabilities and Shareholders'
                equity                                                          $ 142,095,589      $ 171,421,689

</TABLE>


                                        The accompanying notes are an integral
                                           part of the financial statements.


<PAGE>
<TABLE>
<CAPTION>

                                       KRUPP GOVERNMENT INCOME TRUST

                               STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                           For the Years Ended December 31, 1999, 1998 and 1997


                                                                 1999                  1998                1997

Revenues:
    Interest income - PIMs and PIMIs:
<S>                                                         <C>                   <C>                   <C>
      Basic interest                                        $    8,789,439        $  10,635,959         $ 12,180,539
      Additional Loan interest                                   2,534,790            3,080,944              793,577
      Participation income                                       2,268,505            5,094,353            1,385,480
    Interest income - MBS                                        1,531,351            1,930,383            2,199,234
    Interest income cash and cash
       equivalents                                                 508,144            1,180,647            1,058,966

      Total revenues                                            15,632,229           21,922,286           17,617,796

Expenses:
    Asset management fee
     to an affiliate (Note G)                                    1,104,431            1,331,745            1,531,026
    Expense reimbursements
     to affiliates (Note G)                                        220,657              207,165              395,934
    Amortization of prepaid fees
     and expenses                                                1,672,143            2,998,705            2,405,645
    General and administrative                                     269,345              433,860              385,956
    Provision for impaired mortgage
     loans (Notes B and C)                                          48,272            2,114,346               -

             Total expenses                                      3,314,848            7,085,821            4,718,561

Net income (Note I)                                             12,317,381           14,836,465           12,899,235

Other comprehensive income:
    Net change in unrealized (loss)
      gain on MBS                                                 (641,460)            (512,826)             120,250

Total comprehensive income                                  $   11,675,921        $  14,323,639         $ 13,019,485

Basic earnings per share                                    $          .82        $         .99         $        .86

Weighted average shares outstanding                             15,053,135           15,053,135           15,053,135

</TABLE>

                                       The accompanying notes are an integral
                                          part of the financial statements.


<PAGE>

<TABLE>
<CAPTION>

                                       KRUPP GOVERNMENT INCOME TRUST

                               STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                           For the Years Ended December 31, 1999, 1998 and 1997


                                                                                        Accumulated              Total
                                                   Common              Retained        Comprehensive         Shareholders'
                                                    Stock              Earnings           Income                Equity

<S>                                            <C>                   <C>               <C>                   <C>
Balance at December 31, 1996                   $  233,015,255        $       -         $   1,265,352         $  234,280,607

Dividends                                         (20,518,745)         (12,899,235)             -               (33,417,980)

Net income                                               -              12,899,235              -                12,899,235

Change in unrealized gain
       on MBS                                          -                    -                120,250                120,250

Balance at December 31, 1997                      212,496,510                -             1,385,602            213,882,112

Dividends                                         (47,754,496)         (14,836,465)             -               (62,590,961)

Net income                                               -              14,836,465              -                14,836,465

Change in unrealized gain
       on MBS                                          -                    -               (512,826)              (512,826)

Balance at December 31, 1998                      164,742,014               -                872,776            165,614,790

Dividends                                         (26,820,787)         (12,317,381)          -                  (39,138,168)

Net income                                             -                12,317,381           -                   12,317,381

Change in unrealized gain
     on MBS                                            -                    -               (641,460)              (641,460)

Balance at December 31, 1999                    $ 137,921,227        $      -           $    231,316         $  138,152,543


Shares issued and outstanding for each of the three years ended
December 31, are 15,053,135

</TABLE>



                               The accompanying notes are an integral
                                  part of the financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                     KRUPP GOVERNMENT INCOME TRUST

                                        STATEMENTS OF CASH FLOWS

                           For the Years Ended December 31, 1999, 1998 and 1997


                                                                       1999                 1998                  1997
Operating activities:
<S>                                                               <C>                  <C>                   <C>
   Net income                                                     $   12,317,381       $  14,836,465         $ 12, 899,235
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
   Amortization of premium and (discounts)                                 3,044              (7,646)                2,816
   Provision for impaired mortgage loans                                  48,272           2,114,346                 -
   Amortization of prepaid fees and expenses                           1,672,143           2,998,705             2,405,645
   Changes in assets and liabilities:
    Decrease in interest receivable
     and other assets                                                     83,874             236,875               413,559
    (Decrease) increase in deferred income
     on  Additional Loans                                             (1,855,648)         (2,097,937)              546,192
    (Decrease) increase in other
     liabilities                                                          (8,205)              7,816                (2,319)

         Net cash provided by operating
          activities                                                  12,260,861          18,088,624            16,265,128

Investing activities:
   Principal collections on Insured Mortgages                            800,921             855,221               891,321
   Principal collections on MBS                                        3,992,931           4,447,303             3,152,419
   Insured mortgage prepayments                                       14,861,957          32,603,506             5,630,985
   Additional Loan prepayments                                         2,844,600           5,850,900             1,540,000
   Acquisition of MBS                                                      -                -                   (3,366,000)

         Net cash provided by investing
          activities                                                  22,500,409          43,756,930             7,848,725

Financing activity:
   Dividends                                                         (39,138,168)        (62,590,961)          (33,417,980)

Net decrease in cash and
 cash equivalents                                                     (4,376,898)           (745,407)           (9,304,127)

Cash and cash equivalents, beginning
 of year                                                               9,004,397           9,749,804            19,053,931

Cash and cash equivalents, end of year                            $    4,627,499       $   9,004,397         $   9,749,804

Non Cash Activities:
(Decrease) increase in Fair Value of MBS                          $     (641,460)      $   (512,826)         $     120,250

</TABLE>


                                        The accompanying notes are an integral
                                           part of the financial statements.



<PAGE>

                                             KRUPP GOVERNMENT INCOME TRUST

                                             NOTES TO FINANCIAL STATEMENTS

A.        Organization

          Krupp Government  Income Trust (the "Trust") was formed on November 1,
          1989  by  filing  a  Declaration  of  Trust  in  The  Commonwealth  of
          Massachusetts. The Trust is authorized to sell and issue not more than
          17,510,000 shares of beneficial interest (the "Shares"). The Trust was
          organized for the purpose of investing in commercial and  multi-family
          loans and mortgage  backed  securities.  Berkshire  Mortgage  Advisors
          Limited Partnership ("BMALP")(the "Advisor"),  acquired 10,000 of such
          Shares for $200,000 and 14,999,999  Shares were sold for  $299,480,263
          net of purchase  volume  discounts of $519,717 under a public offering
          which  commenced on April 19, 1990 and ended on July 15,  1991.  Under
          the Dividend  Reinvestment  Plan ("DRP"),  43,136 Shares were sold for
          $819,356  during its public  offering.  The Trust shall  terminate  on
          December 31, 2029,  unless earlier  terminated by the affirmative vote
          of holders of a majority of the  outstanding  Shares  entitled to vote
          thereon.

B.        Significant Accounting Policies

          The Trust uses the following accounting policies for financial
          reporting purposes:

          MBS

          The Trust,  in  accordance  with the  Financial  Accounting  Standards
          Board's Statement 115, "Accounting for Certain Investments in Debt and
          Equity  Securities"  ("FAS  115"),  classifies  its MBS  portfolio  as
          available-for-sale.  As such, the Trust carries its MBS at fair market
          value  and  reflects  any  unrealized  gains  (losses)  as a  separate
          component  of  Shareholders'  Equity.  The  Trust  amortizes  purchase
          premiums or discounts over the life of the underlying  mortgages using
          the effective interest method.

          Effective  January 1, 1998, the Trust adopted "Statement of Financial
          Accounting Standards No. 130, 'Reporting  Comprehensive  Income'" (FAS
          130).  FAS 130  established  standards for  reporting  and  displaying
          comprehensive   income   and  its   components.   FAS   130   requires
          comprehensive   income  and  its  components,   as  recognized   under
          accounting  standards,  to be displayed in a financial  statement with
          the same prominence as other financial statements,  if material.  FASB
          130 had no  material  effect  on the  Trust's  financial  position  or
          results of operations.

          The Federal Housing  Administration  (FHA) insured mortgage is carried
          at amortized  cost.  The Trust holds this loan at amortized cost since
          it is fully insured by FHA.

          PIMs and PIMIs

          The Trust  accounts for its MBS portion of a PIM or PIMI in accordance
          with FAS 115 under the  classification of held to maturity.  The Trust
          carries those MBS at amortized cost.

          The insured  mortgage portion of the FHA PIM or FHA PIMI is carried at
          amortized  cost.  The Trust holds these  mortgages at  amortized  cost
          since they are fully insured by FHA.

                                            Continued


<PAGE>

                                  KRUPP GOVERNMENT INCOME TRUST

                             NOTES TO FINANCIAL STATEMENTS, Continued


B.        Significant Accounting Policies, Continued

          PIMs and PIMIs, Continued

          The Additional  Loans are carried at amortized cost unless the Advisor
          of the Trust believes there is an impairment in value, in which case a
          valuation  allowance is established in accordance with FAS 114 and FAS
          118.

          Basic  interest  is  recognized  based  on  the  stated  rate  of  the
          Department of Housing and Urban  Development  ("HUD") Insured Mortgage
          loan (less the  servicer's  fee) or the coupon rate of the  Government
          National  Mortgage  Association  ("GNMA") or Fannie Mae MBS. The Trust
          recognizes  interest  related to the  participation  features  when it
          deems these amounts  estimable and  collectible.  The Trust defers the
          recognition  of  Additional  Loan  interest  payments as income to the
          extent these interest  payments are from escrows  established with the
          proceeds of the Additional  Loan.  When the properties  underlying the
          PIMI's  generate  sufficient  operating cash flow to make the required
          Additional  Loan  interest  payments  the Trust  recognizes  income as
          earned  commences  amortization of the deferred  interest amounts into
          income  over the  remaining  estimated  term of the  Additional  Loan.
          During  periods where  mortgage  loans are impaired the Trust suspends
          amortizing deferred interest.

          The Trust also fully  reserves  the  portion  of any  Additional  Loan
          interest payment  satisfied  through the issuance of an operating loan
          and any associated interest due on such operating loan. The Trust will
          recognize the income  related to the operating  loan when the borrower
          repays amounts due under the operating loan.

          Impaired Mortgage Loans

          Impaired  loans are those loans which the  Advisor  believes  that the
          collection of all amounts due in accordance with the contractual terms
          of the loan  agreement  are not likely.  Impaired  loans are  measured
          based  on the  fair  value  of  the  underlying  collateral.  Interest
          received on the impaired loans is generally  applied  against the loan
          principal or as interest income if deemed collectable by the Advisor.

          Cash Equivalents

          The Trust includes all short-term investments with maturities of three
          months  or  less  from  the  date of  acquisition  in  cash  and  cash
          equivalents.  The Trust  invests its cash  primarily in Agency  paper,
          commercial paper and money market funds with a commercial bank and has
          not experienced any loss to date on its invested cash.

          Prepaid Fees and Expenses

          Prepaid  fees and  expenses  represent  prepaid  acquisition  fees and
          expenses  and  prepaid  participation  servicing  fees  paid  for  the
          acquisition  and  servicing  of PIMs and  PIMIs.  The Trust  amortizes
          prepaid acquisition fees and expenses using a method that approximates
          the  effective  interest  method over a period of ten to twelve years,
          which represents the actual maturity or anticipated call payoff of the
          underlying mortgage.






                                           Continued

<PAGE>

                                 KRUPP GOVERNMENT INCOME TRUST

                            NOTES TO FINANCIAL STATEMENTS, Continued


B.        Significant Accounting Policies, Continued

          Prepaid Fees and Expenses, Continued

          The Trust  amortizes  prepaid  participation  servicing  fees  using a
          method that approximates the effective interest method over a ten year
          period  beginning at final  endorsement  of the loan if a  HUD-insured
          mortgage loan or a GNMA MBS and at closing if a Fannie Mae MBS.

          Income Taxes

          The Trust has elected to be taxed as a REIT under the Internal Revenue
          Code of 1986,  as amended,  and believes it will  continue to meet all
          such  qualifications.  Accordingly,  the Trust  will not be subject to
          federal income taxes on amounts  distributed to shareholders  provided
          it  distributes  annually at least 95% of its REIT taxable  income and
          meets certain other requirements for qualifying as a REIT.  Therefore,
          no  provision  for  federal  income  taxes  has been  recorded  in the
          financial statements.

          Estimates and Assumptions

          The  preparation of financial  statements in accordance with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amount  of  assets  and
          liabilities,  contingent  assets  and  liabilities  and  revenues  and
          expenses  during the  period.  Significant  estimates  include the net
          carrying  value of  Additional  Loans and the  unrealized  gain on MBS
          investments. Actual results could differ from those estimates.

C.        PIMIs

          The Trust had  investments  in five PIMIs on December 31, 1999 and six
          PIMIs on December  31, 1998 that  provide the  permanent  financing of
          multi-family  housing. One component of a PIMI is either a securitized
          HUD-insured  first  mortgage  loan issued and  guaranteed by GNMA or a
          sole participation  interest in a first mortgage loan originated under
          the Federal Housing Administration ("FHA") lending program and insured
          by HUD (collectively the "Insured Mortgages").  The FHA first mortgage
          or the  first  mortgage  underlying  the GNMA  security  provides  the
          borrower  (generally  a  limited  partnership)  with  a  below  market
          interest   rate  loan  in  exchange  for   providing  the  Trust  with
          participation  in a percentage  of the cash  generated  from  property
          operations and in a percentage of any  appreciation  of the underlying
          property to a preferred return,  then a percentage of any appreciation
          thereafter.  The borrower  conveys these rights to the Trust through a
          subordinated promissory note and mortgage. In addition, the Trust made
          an Additional Loan to the owners of the borrower to provide additional
          funds for the  construction  and permanent  financing of the property.
          The owners  generally  collateralize  the  Additional  Loan  through a
          pledge and security  agreement that pledges their ownership  interests
          in the  borrower,  and  their  share of any  distributions  made  from
          surplus cash generated by the property and the proceeds  realized upon
          the  refinancing of the property,  sale of the property or sale of the
          partnership  interests.  Amounts payable under the Additional Loan are
          neither guaranteed nor insured.



                                             Continued

<PAGE>


                                     KRUPP GOVERNMENT INCOME TRUST

                                NOTES TO FINANCIAL STATEMENTS, Continued


C.             PIMIs, Continued

               The Trust receives level monthly  principal and interest  ("Basic
               Interest") payments amortizing over thirty to forty years, on the
               Insured Mortgage and is entitled to receive  participation income
               under  the  subordinated   promissory  note  and  mortgage,   and
               semi-annual  interest  payments  ("Additional Loan Interest") and
               preferred  interest under the Additional Loan. The Trust receives
               principal  and  interest   payments  on  the  insured   mortgages
               currently,  because  these  payments  are insured or  guaranteed;
               however,  there are  limitations  to the amount and obligation to
               pay participation income and Additional Loan interest.

               The subordinated  promissory note and mortgage entitles the Trust
               to receive (i) Participating  Income Interest  generally equal to
               50% of (a) all  distributable  Surplus  Cash (as  defined  in the
               regulatory agreement of the HUD-insured first mortgage) generated
               by the property (b) any unrestricted cash generated from property
               operations and (c) to the extent  available  unexpended  reserves
               and  escrows,  and  (ii)  Participating   Appreciation   Interest
               generally  equal  to 50% of the  net  proceeds  or  value  of the
               property  upon the sale,  refinancing,  maturity  or  accelerated
               maturity,  or permitted  prepayment  of all amounts due under the
               Insured   Mortgage  and  Additional  Loan  less  the  Outstanding
               Indebtedness,  as defined. Amounts received by the Trust pursuant
               to the  subordinated  promissory  note  as  Participating  Income
               Interest  reduce  amounts  payable as Preferred  Interest and may
               reduce  amounts  payable as Base  Interest  under the  Additional
               Loan.

               The Insured Mortgage and  subordinated  promissory note generally
               have   maturities  of  30  to  40  years,   however,   under  the
               subordinated  promissory note the Trust can generally  accelerate
               these  maturity  dates  at any  time  after  the  ninth  or tenth
               anniversary of final  endorsement  for  coinsurance or insurance,
               but in certain cases for construction loans after the eleventh or
               twelfth  anniversary  of  initial  endorsement  (commencement  of
               construction)  for  coinsurance or insurance,  upon giving twelve
               months   written   notice  for  the   payment   of  all   accrued
               participation interest through the accelerated maturity date. The
               Trust can accelerate the maturity date for payment of amounts due
               under the  subordinated  promissory note and the insured mortgage
               providing  the  contract of  insurance  or  coinsurance  with the
               Secretary of HUD on the insured mortgage is canceled prior to the
               accelerated maturity date.

               Additional  Loan Interest is payable from the following  sources:
               (i)  any  Surplus  Cash  received  pursuant  to the  subordinated
               promissory note as Participating  Income  Interest,  (ii) amounts
               conveyed  to the  Trust by the  owners  of the  borrowing  entity
               representing  distributions  of Surplus Cash and (iii) amounts in
               reserve  accounts  established with the Additional Loan proceeds,
               if available,  and any interest earned on these amounts. If these
               sources  are not  sufficient  to make  Additional  Loan  Interest
               payments the owners of the borrowing entity must notify the Trust
               of the amount of the  shortfall and at its option the Trust could
               require a capital call from the owners of the  borrowing  entity.
               The  capital  call would be equal to 50% of the  Additional  Loan
               Interest  shortfall  and the Trust in  certain  situations  could
               convert the remaining 50% into an operating loan.


                                              Continued

<PAGE>





                                    KRUPP GOVERNMENT INCOME TRUST

                               NOTES TO FINANCIAL STATEMENTS, Continued


C.             PIMIs, Continued

               In  addition  to  the  Additional  Loan  Interest  payments,  the
               Additional  Loan  requires  the  payment  of  Preferred  Interest
               representing a cumulative,  non-compounded  preferred return from
               the  date of final  endorsement  to the  date of  calculation  at
               interest  rates  ranging  from  9.5%  to  11%  per  annum  on the
               outstanding  balance of the Insured  Mortgage plus the Additional
               Loan and any other funds  advanced by the Trust to the  borrowing
               entity or the owners of the borrowing  entity less:  (i) interest
               payments  paid to the Trust  under  the  Insured  Mortgage,  (ii)
               Participating  Income Interest and (iii) Additional Loan Interest
               payments  made  under  the  Additional  Loan  including   amounts
               foregone by the Trust.

               The insured mortgage and  subordinated  promissory note generally
               cannot be prepaid for a term of five years from the  construction
               completion  date  or  final  endorsement  and  thereafter  may be
               prepaid  in whole  without  penalty  provided  all  participation
               interest and amounts  under the insured  mortgage  are paid.  Any
               prepayment  requires  not less than ninety nor more than 180 days
               prior written notice.

               The Additional Loan generally may not be prepaid before the fifth
               anniversary of the Agreement or the construction  completion date
               and  thereafter may be prepaid in full without  penalty  provided
               Preferred Interest and any amounts due under the insured mortgage
               and subordinated promissory note are paid in full.

               In June  1999,  the  Trust  entered  into a  second  modification
               agreement  (the  "Agreement")  with the borrowers of the Mountain
               View  Apartments  PIMI  reducing the interest rate on the insured
               mortgage  by  1.25%  per  annum  beginning  January  1,  1999 and
               continuing   through   December   31,  2004  and   changing   the
               participation  feature.  The Agreement  eliminated  the Preferred
               Interest  required  under the  Additional  Loan and  changed  the
               Trust's  participation  in  the  surplus  cash  generated  by the
               property.  Under the Agreement, the Trust will receive 75% of the
               first  $130,667 of surplus cash and 50% of any remaining  surplus
               cash  on an  annual  basis  to  pay  the  base  interest  on  the
               Additional Loan. Unpaid Additional Loan base interest will accrue
               and be payable if there are  sufficient  proceeds  from a sale or
               refinancing  of the  property  except  that  $288,580 of existing
               accruals  related to the Additional  Loan had been  forgiven.  In
               addition, the borrower repaid $153,600 of the Additional Loan and
               funded   approximately   $54,000  to  a  reserve   for   property
               improvements.

               During the third quarter of 1999, the Trust received a prepayment
               of the Audubon Villas PIMI including the Insured  mortgage with a
               remaining  principal balance of $14,861,957,  the Additional Loan
               of  $2,691,000  and  participation  income of  $1,966,901.  Also,
               $1,962,261  was  recognized  as Additional  Loan interest  income
               which was previously  recorded as deferred income.  On August 18,
               1999, the Advisor  declared a special dividend of $1.30 per share
               that was paid on  September  17,  1999  from  the  payoff  of the
               mortgage on the Audubon Villas PIMI.

               On May 1, 1998, the borrowers on the Lifestyles PIMI defaulted on
               its May 1998 debt service payment. The Trust continued to receive
               its monthly principal and interest  payments  guaranteed by GNMA.
               In December  1998,  the Trust entered into a second  modification
               agreement with the borrowers of the Lifestyles  PIMI reducing the
               interest paid monthly on the insured  mortgage by 1.75% per annum
               for 1998 and 1999 and 1.5% per annum for 2000  through  2007.  In
               addition,  the  borrowers  made a $550,000  equity  contribution,
               which has been escrowed,  for the exclusive purpose of correcting
               deferred maintenance. Under the Agreement any future surplus cash
               generated by property operations will be split evenly between the
               Trust and the borrowers as Participating  Income  Interest.  When
               the property is sold or refinanced,  the first  $1,100,000 of any
               proceeds  remaining  after the insured first mortgage is paid off
               will be split 50% / 50%; the next  $1,690,220 of proceeds will be
               split 75% to the Trust and 25% to the  borrower(the  repayment of
               the Additional  Loan);  and any remaining  proceeds will be split
               50% / 50% between the Trust and the borrower.  The Trust will not
               earn any Preferred Return or Additional Loan interest.


                                            Continued

<PAGE>



                                  KRUPP GOVERNMENT INCOME TRUST

                              NOTES TO FINANCIAL STATEMENTS, Continued


C.             PIMIs, Continued

               During June of 1998,  the Trust received a prepayment of the Park
               Highlands Insured Mortgage and Additional Loan having a remaining
               principal balances of $16,752,295 and $3,000,000 respectively. In
               addition,  the Trust  received  the  following:  (i) a  Preferred
               Return of $1,481,865, (ii) Participating Appreciation interest of
               $1,206,719,   (iii)  a  Prepayment  Premium  of  $479,476,   (iv)
               Participating Income interest of $211,316 and (v) Additional Loan
               interest payable through the date of sale of $57,945.

               On July 15, 1998,  the Trust received a prepayment of The Coconut
               Palm Club Insured Mortgage having a remaining  principal  balance
               of  $15,851,211.  In  addition,  in June  the  Trust  received  a
               prepayment   of  the  Coconut  Palm  Club   Additional   Loan  of
               $2,850,900.  The  Trust  also  received  a  preferred  return  of
               $1,419,116 and Additional Loan interest  payable through the date
               of sale of $89,091.

               Due to the  prepayments  of the Park  Highlands  and Coconut Palm
               Club  Additional   Loans  in  June,  the  Trust  also  recognized
               Additional   Loan   interest   of   $1,290,000   and   $1,295,354
               respectively,  that had been  previously  classified  as deferred
               income on these Additional Loans.

               On August 6, 1998,  the  Advisor of the Trust  declared a special
               dividend  of $2.86 per share that was paid on  September  9, 1998
               from the  prepayment  proceeds of the Park  Highlands and Coconut
               Palm Club PIMIs.

               On  February  6,  1997,  the  Trust,  with  the  approval  of the
               independent  Trustees,  agreed to a workout  with the borrower of
               the Windward Lakes  Apartments  PIMI, an affiliate of the Advisor
               of the Trust.  The terms are as follows:  a) interest rate relief
               for 1997 of 2% per annum and 1% per annum for 1998  through  2000
               on  the  Insured  Mortgage:  b) the  borrower,  McNab  KC-3  L.P.
               ("McNab"),  contributed $133,036 of new equity into the property;
               c) the  borrower  will cap the annual  management  fee paid to an
               affiliate  at 3% of  revenues;  d) the Trust's  participation  in
               current  operations  shall be 50% of Surplus  Cash as  determined
               under HUD guidelines; e) Additional Loan Interest is payable from
               the Trust's  share of Surplus Cash and unpaid  amounts  accrue at
               7.5% per annum;  and f) the  Trust's  participation  in a sale or
               refinancing, after repayment of the first mortgage and additional
               loans, interest rate relief, accrued Additional Loan Interest and
               McNab's new equity,  shall be 50% of any remaining proceeds up to
               an amount  which  would  result in the Trust  having  received  a
               cumulative,   noncompounded   preferred  return  of  10%  on  its
               investment  in the  first  mortgage  and  additional  loans;  any
               remaining proceeds shall be distributed to McNab.


               During the first quarter of 1997 the Trust received proceeds from
               the  prepayment of The Timber Ridge  Apartments  PIMI as follows:
               $1,540,000 to payoff the Additional Loan; $1,246,159 representing
               Participation   income  which  includes   prepayment   penalties;
               $5,630,985 to payoff the  outstanding  first  mortgage  principal
               balance.  During  the third  quarter  of 1997,  the Trust  made a
               special dividend of $.92 per share to its investors. This special
               dividend was funded from the 1996 Canyon Ridge PIM prepayment and
               the  1997  Timber   Ridge   prepayment   proceeds,   net  of  the
               reinvestment  in a  $3,400,000  face  value  insured  multifamily
               mortgage.

               At December 31, 1999 and 1998 there are no Insured Mortgage loans
               within the Trust's  portfolio that are delinquent as to principal
               or interest.



                                           Continued


<PAGE>
<TABLE>
<CAPTION>

                                  KRUPP GOVERNMENT INCOME TRUST

                              NOTES TO FINANCIAL STATEMENTS, Continued


      The Trust's investments in PIMIs consist of the following at
      December 31, 1999 and 1998:


      C.  PIMIs, Continued
                               Original
                                 Loan            Monthly     Interest     Maturity          Balance Outstanding
      PIMI's                    Amount           Payments      Rate         Date              at December 31,
                                                                                            1999                  1998
<S>                         <C>             <C>               <C>         <C>         <C>                   <C>
Lifestyles (GNMA)           $  10,292,394   $       60,958    7.00%(a)    05/01/32    $  9,966,008         $  10,022,381

Windward (GNMA)                14,000,778           91,165    7.50%(b)    06/01/32      13,596,232            13,667,163

Audubon Villas (GNMA)          15,250,000            -        7.75%       09/15/33              -             14,909,371

Mountain View (FHA)             9,547,700           57,504    6.875%(c)   01/01/34       9,315,978             9,363,459

Red Run (FHA)                  19,019,600          130,312    7.875%      05/01/34      18,552,815            18,651,261

The Seasons (FHA) (d)           9,075,351           63,552    7.875%      10/01/28       8,698,459             8,772,825

                            $  77,185,823   $      403,491                            $ 60,129,492         $  75,386,460
                                                                                        (f)

</TABLE>
<TABLE>
<CAPTION>

                                                                                               Base         Preferred
                                            Outstanding Balance            Maturity          Interest        Interest
      Additional Loan                    1999                1998            Date              Rate            Rate

      <S>                          <C>                 <C>                 <C>                 <C>              <C>
      Lifestyles (a)               $  1,817,665        $  1,817,665        05/14/2007           -                -

      Windward (b)                    2,471,294           2,471,294        07/07/2002          7.5%             10%

                  Audubon Villas       -                  2,691,000            -               7.0%             10%

                  Mountain View (c)   1,400,000           1,553,600        09/16/2003          7.0%              -

                  Red Run             2,900,000           2,900,000        06/23/2004          7.0%             10%

                  The Seasons(d)(e)   1,924,649           1,924,649        10/01/2028          9.0%             10%

                                   $ 10,513,608        $ 13,358,208

(a)  The Trust entered into an Agreement  which reduced the interest rate on the
     Insured Mortgage by 1.75% per annum effective  January 1, 1998 for a period
     of  twenty-four  months and 1.5% per annum for 2000 though 2007.  The Trust
     will not receive any  Additional  Loan interest or Preferred  Return due to
     the workout.

(b)  The Trust entered into an agreement  which reduced the interest rate on the
     Insured  Mortgage  by 2.0% per annum for 1997 and by 1.0% for 1998  through
     2000. Additional loan interest is payable from surplus cash.

</TABLE>

                                                       Continued

<PAGE>



                                             KRUPP GOVERNMENT INCOME TRUST

                                       NOTES TO FINANCIAL STATEMENTS, Continued


C.   PIMIs, Continued

(c)  The Trust entered into a second  modification  agreement  which reduced the
     interest rate on the Insured Mortgage by 1.25% per annum effective  January
     1, 1999 and continuing through December 31, 2004. The Agreement  eliminated
     the Preferred  Interest  required under the Additional Loan and changed the
     Trust's  participation  in the  surplus  cash  generated  by the  property.
     Furthermore,  debt service relief  provided by the first  modification  was
     forgiven.

(d)  The total PIM and  Additional  Loan on this property were  $32,300,000  and
     $6,850,000,  respectively,  of which 72% is held by Krupp Government Income
     Trust II. The Seasons is affiliated with the Advisor of the Trust.

(e)  The  Additional  Loan  interest  rate was 6% per annum for the first  three
     years and beginning in September 1996 increased to 9% per annum.

(f)  The aggregate cost for federal income tax purposes is $60,129,492.

Impaired  Mortgage  Loans

The  Advisor  of the Trust  has  determined  that the
Lifestyles  Additional Loan is impaired.  As a result,  during 1998, a valuation
allowance of $1.1 million was  established to adjust the carrying  amount of the
loan to the estimated fair market value of the collateral less anticipated costs
of sale. The Trust will recognize interest income to the extent cash is received
and supported by operating cash flow generated by the collateral.  The Trust did
not recognize  interest income on the Lifestyles  Additional Loan during 1999 or
1998.

The Advisor of the Trust has determined  that the Mountain View  Additional Loan
is impaired.  As a result,  during  1998, a valuation  allowance of $984,000 was
established to adjust the carrying amount of the loan to the then estimated fair
market value of the collateral less anticipated  costs of sale. During 1999, the
Trust increased the valuation  allowance of Mountain View by $48,272.  The Trust
will recognize  interest  income to the extent cash is received and supported by
operating  cash flow  generated by the  collateral.  The Trust did not recognize
interest income income on the Mountain View Additional Loan during 1999 or 1998.
<TABLE>
<CAPTION>

The activity in the valuation  allowance  together with the related recorded and
carrying value of the mortgage loans is as follows:

                                           Recorded               Valuation            Carrying
                                             Value                Allowance              Value

<S>                                        <C>                     <C>                <C>
Lifestyles                                 $1,817,665              $1,130,346         $   687,319

Mountain View                               1,400,000               1,032,272             367,728

Balance at
  December 31, 1999                        $3,217,665              $2,162,618          $1,055,047

</TABLE>


The recorded value of the impaired mortgage loans did not differ materially from
the  balances  reported at the end of each  quarter  with the  exception  of the
impairment  recorded  in the  fourth  quarter  of 1998  for the  Lifestyles  and
Mountain View  Additional  Loans.  The Trust has also deferred income related to
Lifestyles and Mountain View of $687,319 and$367,383, respectively.



                                          Continued
<PAGE>
<TABLE>
<CAPTION>
                                KRUPP GOVERNMENT INCOME TRUST

                           NOTES TO FINANCIAL STATEMENTS, Continued



C. PIMIs, Continued

   A reconciliation  of activity for each of the three years in the period ended
   December 31, is as follows:

Insured Mortgages
                                                          1999                      1998                    1997

<S>                                                  <C>                        <C>                     <C>
Balance at beginning of period                       $   75,386,460             $  108,470,247          $  114,625,179

     Insured mortgage prepayments                       (14,861,957)               (32,603,506)             (5,630,985)

     Principal collections                                 (395,011)                  (480,281)               (523,947)


Balance at end of period                             $   60,129,492             $   75,386,460          $  108,470,247


Additional Loans

Balance at beginning of period                       $   11,243,862             $   19,209,108          $   20,749,108

     Additional loan prepayments                         (2,844,600)                (5,850,900)             (1,540,000)

     Valuation allowance                                    (48,272)                (2,114,346)             -

Balance at end of period                             $    8,350,990             $   11,243,862          $   19,209,108
</TABLE>

Property descriptions:
-    Lifestyles  Apartments  ("Lifestyles") is a 236-unit garden style apartment
     complex located in Palm Harbor, Florida.
-    Windward Lakes Apartments ("Windward") is a 276-unit garden style apartment
     complex located in Pompano Beach, Florida.
-    Audubon  Villas is a 308-unit  apartment  complex  located  in  Clearwater,
     Florida.
-    Mountain View Apartments  ("Mountain View") is a 256-unit apartment complex
     located in Madison, Alabama.
-    Red Run Apartments ("Red Run") is a 304-unit  apartment  complex located in
     Owings Mills, Maryland.
-    The Seasons is a 1,088-unit apartment complex located in Laurel, Maryland.

D. PIMs

The Trust had  investments  in five PIMs at December 31, 1999.  The Trust's PIMs
consist of a GNMA or Fannie Mae MBS representing the securitized  first mortgage
loan on the  underlying  property  or a sole  participation  interest in a first
mortgage  loan  originated  under  the FHA  lending  program  on the  underlying
property (collectively the "Insured Mortgages"),  and participation interests in
the revenue stream and  appreciation of the underlying  property above specified
base levels.  The borrower  conveys  these  participation  features to the Trust
generally through a subordinated promissory note and mortgage (the "Agreement").

The Trust receives  guaranteed level monthly payments of principal and interest,
amortizing  over  thirty to forty  years on the GNMA and  Fannie Mae MBS and HUD
insures the mortgage loan underlying the GNMA MBS and the FHA mortgage loan. The
borrower  usually  cannot  prepay the first  mortgage loan during the first five
years  and may  prepay  the  first  mortgage  loan  thereafter  subject  to a 9%
prepayment  penalty in years six through nine, a 1%  prepayment  penalty in year
ten and no prepayment penalty  thereafter.  The Trust may receive income related
to its  participation  interests  in the  underlying  property,  however,  these
amounts are neither insured nor guaranteed.

                                      Continued
<PAGE>


                           KRUPP GOVERNMENT INCOME TRUST

                     NOTES TO FINANCIAL STATEMENTS, Continued


D. PIMs, continued

Generally,  the  participation  features consist of the following:  (i) "Minimum
Additional  Interest" at rates ranging from .5% to .75% per annum  calculated on
the unpaid principal  balance of the first mortgage on the underlying  property,
(ii)  "Shared  Income  Interest"  ranging  from 25% to 30% of the monthly  gross
rental  income  generated  by the  underlying  property in excess of a specified
base,  but only to the extent that it exceeds  the amount of Minimum  Additional
Interest  received during such month, and (iii) "Shared  Appreciation  Interest"
ranging from 25% to 30% of any increase in value of the  underlying  property in
excess of a specified base.

Payment of  participation  income from the operations of the property is limited
to 50% of net  revenue  or  surplus  cash  as  defined  by  Fannie  Mae or  HUD,
respectively.  Payment of participation  income at the time of the prepayment of
the PIM or upon its  maturity  generally  cannot  exceed 50% of any  increase in
value of the underlying property.

Shared  Appreciation  Interest is payable when one of the following occurs:  (1)
the sale of the underlying  property to an unrelated third party on a date which
is later than five years from the date of the  Agreement,  (2) the maturity date
or accelerated maturity date of the Agreement,  or (3) prepayment of amounts due
under the Agreement and the Insured Mortgage.

Under the Agreement,  the Trust,  upon giving twelve months written notice,  can
accelerate  the  maturity  date of the  Agreement to a date not earlier than ten
years from the date of the  Agreement  for (a) the payment of all  participation
interest due under the Agreement as of the accelerated maturity date, or (b) the
payment of all  participation  interest due under the Agreement plus all amounts
due on the first mortgage note on the property.

At December  31, 1999 and 1998 there are no Insured  Mortgage  loans  within the
Trust's portfolio that are delinquent of principal or interest.
<TABLE>
<CAPTION>

The Trust's PIMs consisted of the following at December 31, 1999 and 1998:

                                Original
                                  Loan          Monthly       Interest     Maturity
PIM                              Amount         Payments         Rate         Date      Balance Outstanding at December 31,
                                                                                               1999              1998
<S>                         <C>              <C>               <C>         <C>           <C>                <C>
River View (GNMA)           $   9,284,877    $       64,535    8.00%       01/15/33      $  9,019,623       $  9,070,196

Mill Pond (FHA)                 7,812,100            55,157    8.15%       01/01/33         7,580,257          7,622,447

Waterford (FHA)                 6,935,900            48,832    8.125%      08/01/32         6,713,520          6,752,284

Rivergreens (FHA)              10,003,000            69,518    8.005%      04/01/33         9,711,260          9,765,665

Lincoln Green (FNMA)           15,565,000            99,571    6.75%       10/01/02        14,307,013         14,526,991
                                                                             (a)
   Total                    $  49,600,877    $      337,613                              $ 47,331,673       $ 47,737,583
                                                                                               (b)
     (a)  Normal monthly benefit is based on a 30-year amortization.  All unpaid
          principal of approximately  $13,583,000 and accrued interest is due at
          the maturity date.
     (b)  The aggregate cost for federal income tax purposes is $47,331,673.
</TABLE>



                                     Continued
<PAGE>
<TABLE>
<CAPTION>

                            KRUPP GOVERNMENT INCOME TRUST

                        NOTES TO FINANCIAL STATEMENTS, Continued


D. PIMs, continued

A  reconciliation  of activity  for each of the three years in the period  ended
December 31, is as follows:
                                                           1999                1998                 1997

<S>                                                 <C>                 <C>                    <C>
Balance at beginning of period                      $  47,737,583       $  48,112,523          $  48,479,897

   PIM prepayment                                          -                    -                   -
   Prinicipal collections                                (405,910)           (374,940)              (367,374)

Balance at end of period                            $  47,331,673       $  47,737,583          $  48,112,523
</TABLE>

Property descriptions:

     -    River View Apartments  ("River View") is a 220-unit  apartment complex
          located in Columbia, South Carolina.
     -    Mill Pond Apartments ("Mill Pond") is a 146-unit  apartment complex in
          Bellbrook, Ohio.
     -    Waterford Townhomes  Apartments  ("Waterford") is a 122-unit apartment
          complex in Eagen, Minnesota.
     -    Rivergreens Apartments ("Rivergreens") is a 208-unit apartment complex
          in Gladstone, Oregon.
     -    Lincoln Green  Apartments  ("Lincoln  Green") is a 616-unit  apartment
          complex in Greensboro, North Carolina.

E. MBS

At December  31,  1999,  the  Trust's MBS  portfolio  had an  amortized  cost of
$12,377,145  and gross  unrealized  gains and losses of  $258,056  and  $26,740,
respectively. At December 31, 1999, the Trust has a FHA insured mortgage with an
amortized  cost of  $4,886,962.  At December 31, 1998, the Trust's MBS portfolio
had an amortized cost of $16,355,176  and gross  unrealized  gains and losses of
$875,328 and $2,552, respectively. At December 31, 1998, the Trust's FHA insured
mortgage had an amortized  cost of $4,904,906.  The Trust's MBS have  maturities
ranging from 2008 to 2035.

<TABLE>
<CAPTION>
                                                                                                 Unrealized
                         Maturity Date                        Fair Value                         Gain/(Loss)
                          <S>                               <C>                                <C>
                          2001 - 2005                       $       -                          $      -
                          2006 - 2010                             462,299                          (3,694)
                          2011 - 2035                          17,032,700                           234,586

                              Total                         $  17,494,999                      $    230,892

</TABLE>

F. Shareholders' Equity

Under the  Declaration of Trust and commencing  with the initial  closing of the
public  offering  of shares,  the Trust has  declared  and paid  dividends  on a
quarterly  basis.  During the period in which the Trust qualifies as a REIT, the
Trust has and will pay quarterly  dividends  aggregating at least 95% of taxable
income on an annual basis to be allocated to the  shareholders  in proportion to
their respective number of shares.


                                     Continued
<PAGE>


                           KRUPP GOVERNMENT INCOME TRUST

                      NOTES TO FINANCIAL STATEMENTS, Continued


In order  for the  Trust  to  maintain  its  REIT  status  with  respect  to the
requirements of Share ownership, the Declaration of Trust prohibits any investor
from owning,  directly or indirectly,  more than 9.8% of the outstanding  Shares
and empowers the Trustees to refuse to permit any transfer of Shares  which,  in
their opinion, would jeopardize the status of the Trust as a REIT.

G. Related Party Transactions

Under the terms of the Advisory Service Agreement, the Advisor receives an Asset
Management  Fee equal to .75% per annum of the value of the  Trust's  actual and
committed invested assets payable quarterly.

The Trust also  reimburses  affiliates of the Advisor for certain costs incurred
in  connection  with  maintaining  the  books and  records  of the Trust and the
preparation  and  mailing  of  financial  reports,  tax  information  and  other
communications to investors.

During the three  years ended  December  31,  1999,  1998,  and 1997,  the Trust
received interest collections on Additional Loans with affiliates of the Advisor
of the Trust of $ 225,156,  $218,841, and $400,838,  respectively.  In addition,
the Trust  received  $ 153,499  in 1999,  $ 93,457 in 1998 and  $32,622  in 1997
related to Participating Interest Income.

H. Original Shares

Upon  termination of the Trust,  an affiliate of the Advisor is committed to pay
to holders of Original Shares the amount (if any) by which (a) the Shareholders'
Original  Investments  exceed (b) all Dividends  (as defined in the  prospectus)
paid by the Trust with  respect to such  Original  Shares.  Original  Shares are
those Shares purchased during the Trust's initial public offering either through
purchase or through the  dividend  reinvestment  program and held until the last
mortgage held by the Trust is repaid or disposed of.
<TABLE>
<CAPTION>

I. Federal Income Taxes

     <S>                                                                                  <C>
     Net income per statement of income                                                   $   12,317,381

     Add:     Provision for impaired mortgage loan                                                48,272
     Less:    Additional Loan interest recognized and previously
              deferred for book purposes                                                      (1,825,446)

     Book to tax difference for amortization
      of prepaid fees and expenses                                                              (109,242)

     Net income for federal income tax purposes                                           $   10,430,965
</TABLE>

     The Trust paid  dividends of $2.60 per share  during 1999 which  represents
     approximately  $.69 from ordinary income and $1.91 represents a non-taxable
     distribution for federal income tax purposes.

     The basis of the Trust's  assets for financial  reporting  purposes is less
     than its tax basis by  approximately  $7,921,000 and $7,311,000 at December
     31, 1999 and 1998,  respectively.  The basis of the Trust's liabilities for
     financial  reporting  purposes  exceeded  its tax  basis  by  approximately
     $3,918,000 and $5,774,000 at December 31, 1999 and 1998, respectively.

                                       Continued


                             KRUPP GOVERNMENT INCOME TRUST

                        NOTES TO FINANCIAL STATEMENTS, Continued


J. Fair Value Disclosures of Financial Instruments

     The Trust uses the following  methods and  assumptions to estimate the fair
     value of each class of financial instruments:

     Cash and Cash Equivalents

     The carrying amount  approximates  fair value because of the short maturity
     of those instruments.

     MBS

     The Trust  estimates  the fair value of MBS based on quoted  market  prices
     while it  estimates  the fair  value of insured  mortgages  based on quoted
     price of MBS with similar interest rates. Based on the estimated fair value
     determined  using these methods and assumptions the Trust's  investments in
     MBS had gross  unrealized  gains and losses of  approximately  $258,000 and
     $27,000 at December 31, 1999 and $875,000 and $3,000 at December 31, 1998.

     PIMs and PIMIs

     There is no active  trading  market for these  investments,  so  management
     estimates  the fair value of the PIMs and the insured  mortgage  portion of
     the PIMIs using quoted  market  prices of MBS having the same stated coupon
     rate as the Insured Mortgages.  Additional Loans are based on the estimated
     fair value of the underlying  properties.  Management  does not include any
     participation  income  in  the  Trust's  estimated  fair  values,   because
     Management  does not believe it can predict the time of  realization of the
     feature with any certainty.  Based on the estimated  fair value  determined
     using these methods and  assumptions,  the Trust's  investments in PIMs and
     PIMIs had gross unrealized  gains and losses of approximately  $419,000 and
     $1,804,000, respectively at December 31, 1999 and gross unrealized gains of
     approximately $3,732,000, at December 31, 1998.
<TABLE>
<CAPTION>

     At December 31, 1999 and 1998,  the Trust  estimated  the fair value of its
     financial instruments as follows:

                                                                       (amounts in thousands)
                                                                 1999                        1998
                                                          Fair        Carrying        Fair        Carrying
                                                         Value          Value         Value          Value

         <S>                                           <C>           <C>            <C>           <C>
         Cash and cash equivalents                     $   4,627     $   4,627      $   9,004     $   9,004

         MBS                                              17,495        17,495         22,133        22,133

         PIMs and PIMIs:
           PIMs                                           46,995        47,332         49,229        47,738
           Insured mortgages                              59,081        60,129         77,627        75,386
           Additional Loans                                8,351         8,351         11,244        11,244

                                                       $ 136,549     $ 137,934      $ 169,237     $ 165,505
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                     KRUPP GOVERNMENT INCOME TRUST

                                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


                                Balance at        Charged to                                Balance at
                                Beginning         costs and                                   end of
Description                      of period         expenses              Revenues               period

<S>                             <C>              <C>                    <C>                  <C>
Additional Loan
impairment provision            $2,114,346       $    48,272            $    -               $ 2,162,618
                                                      (1)


     (1)  The Trust recognized a valuation  allowance  related to the Lifestyles
          and Mountain View Additional Loans.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                   KRUPP GOVERNMENT INCOME TRUST

                                         SUPPLEMENTARY DATA
                                  SELECTED QUARTERLY FINANCIAL DATA


                                                           For the Quarter Ended
                                     March 31,          June 30,          September 30,         December 31,
                                       1999               1999                1999                  1999

     <S>                       <C>                   <C>                 <C>                 <C>
     Total revenues            $     2,972,169       $   2,930,082       $     7,000,373     $     2,729,605

     Net income                $     2,305,965       $   2,128,720       $     5,800,454     $     2,082,242

     Earnings per Share        $           .15       $         .14       $           .39     $           .14



                                                           For the Quarter Ended
                                     March 31,          June 30,          September 30,         December 31,
                                       1998               1998                1998                  1998

     Total revenues            $     3,838,996       $  11,336,961       $     3,772,455     $    2,973,874

     Net income                $     2,909,567       $   9,604,704       $     2,224,441     $       97,753

     Earnings per Share        $           .19       $         .64       $           .15     $          .01

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                                       (Unaudited)
                     (Amounts in thousands, except per Share amounts)

                                                                               Year                  Inception
                                                                              Ended                   Through
                                                                             12/31/99                 12/31/99
      Distributable Cash Flow (a):

      <S>                                                                  <C>                      <C>
      Net income                                                           $     12,317             $    124,788
      Items not requiring or providing the
       use of operating funds:

        Provision for impaired mortgage loan                                         49                    2,163
        Amortization of prepaid fees and
         expenses and organization costs                                          1,672                   14,828
        Additional Loan Interest Deferred                                       (1,855)                    3,918

        Total Distributable Cash Flow ("DCF")                                    12,183                  145,697

      DCF per Share based on Shares
       outstanding at December 31, 1999                                    $        .81             $       9.68 (c)

      Dividends:

       Total dividends to Shareholders                                     $     36,805 (b)         $    269,494 (b)
       Average dividend per Share based
        on Shares outstanding at
        December 31, 1999                                                  $       2.44             $      17.90 (b)(c)
</TABLE>

     (a)  Distributable  Cash Flow  consists  of  income  before  provision  for
          impaired mortgage loans, amortization of prepaid fees and expenses and
          organization costs and includes deferred interest on Additional Loans.
          The  Trust  believes   Distributable   Cash  Flow  is  an  appropriate
          supplemental measure of operating performance,  however, it should not
          be  considered  as a  substitute  for net income as an  indication  of
          operating performance or cash flows as a measure of liquidity.
     (b)  Includes an estimate of the distribution to be paid February 2000.
     (c)  Shareholders average per Share return of capital on a cash basis as of
          February 2000 is $8.22 [$17.90 - $9.68].  Return of capital represents
          that  portion of the  dividends  which is not funded  from DCF such as
          principal collections received from MBS and PIMs.